A small business can view its financial situation by conducting a thorough analysis of its financial statements, tracking key performance indicators (KPIs), and assessing various aspects of its operations.  Below are listed items to help you monitor the financial health of your business and better allow you to determine next steps.

Financial Statements Analysis:

  • Balance Sheet – A balance sheet reviews a company’s assets, liabilities, and equity. This provides an overview of the business’s financial position at a specific point in time.
  • Income Statement – Also known as a profit and loss statement, this summarizes revenues, expenses, and net income over a specific period. This helps determine profitability.
  • Cash Flow Statement – Used to understand how cash is flowing in and out of the business. This is essential for assessing liquidity and cash management.
  • Key Performance Indicators (KPIs)

Identify and track KPIs relevant to the business’s industry and goals.

Regularly monitor these KPIs to gauge the business’s performance and financial health. Common KPIs include:

  • revenue growth,
  • gross profit margin,
  • net profit margin,
  • inventory turnover, and
  • customer acquisition cost (how much a business spends to gain new customers).

Budget and Forecast

Create a budget or financial forecast to project future income, expenses, and cash flow. This helps in setting financial goals and tracking progress toward them.

Debt and Liabilities Assessment

Evaluate the business’s outstanding debts and liabilities. Know when debts are due and what the repayment terms are; this helps in managing debt obligations. Keep track of tax obligations and consider tax planning strategies to minimize tax liabilities.

Revenue Analysis

Analyze the sources of revenue and customer demographics. Identify which products or services are most profitable and which may need adjustments.

Cost Control

Review all expenses and identify areas where cost control measures can be implemented – reducing unnecessary costs can improve profitability.

Inventory and Asset Management

Assess inventory levels and asset utilization. Ensure that inventory turnover is efficient, and assets are being used optimally.

Cash Flow Management

Pay attention to cash flow cycles and ensure that the business has enough working capital to cover operational expenses.

Seek Professional Help

Consider consulting with an accountant or financial advisor who can provide expertise in financial analysis and planning.

Regular Reporting

Establish a routine for financial reporting, both internally and externally if required, to keep stakeholders informed about the business’s financial performance.

Do you have a turnaround plan?

What is your situation, problem, actions, what do you still have to do?

Have you reviewed your financial statements?

  • Can you show positive cash flow?
  • Do you have cash flow forecasts?
  • Do you have a history with debt?
  • What are your average accounts receivables?
  • What other debts do you hold – what are the interest and priority or negotiability of those loans? Are there personal guarantees?

If you need help, please don’t hesitate to call me

Terry Lynch

Mortgage Agent Level 2

TMG The Mortgage Group