With the end of the financial year approaching, now is the perfect time to conduct a business ‘health check’ so that you can come out at the start of the new financial year greatly improved and ready to go.
Clients and customers
Client and customer loyalty is something all businesses should aim for, but if your clients’ values are misaligned with yours, conflict is inevitable. Hence, now is the time to re-evaluate which clients you want to keep loyal and which ones you can see a cooperative future with.
Re-assessing your target audience and deepening your understanding of the wants and needs of your clients would help improve your marketing and sales strategies. If you have clients who frequently struggle to pay you on time or are rude to your employees, assess whether your attention is worthwhile and if you would like to continue to work with them when the economic situation improves.
Employees
Your employees are another stakeholder to check up on during this downtime. Your employees will always be your business’ representatives, so make sure they are up to standard and help them improve their skills. Teach your employees more about your business goals.
Conducting a business health check and strategies and improving the team atmosphere by introducing team recreational activities. Your relationship with your employees now during a global crisis will dictate how they feel about you as a leader and if they can rely on you in the future. Foster respectful, strong and healthy bonds between you and your employees; only good things will come your way.
Suppliers
The key question to ask when reviewing your suppliers is whether or not you are getting what you need from them at a reasonable cost. If you feel that your suppliers are asking too much from you or letting you down with their product quality, take the time now to look for other options. As businesses struggle through current economic conditions, suppliers are becoming competitive, and there are more options to consider. Do your research and decide on the suppliers you want to work with for the long-term.
Finances
Managing your finances is always a difficult task but it is now more important than ever. Your budget and profit predictions for this year are likely going rogue, so reevaluate your finances and research other funding options such as commercial rent, interest rates and banking services.
Consider how you can minimise cost while maximising efficiency and productivity, save as much money as possible during these downtimes, and review your investments in detail to determine whether or not they are worthwhile.
Business health checklist
A business health check-up typically involves a thorough analysis of a company’s financial and operational performance to identify areas of strength and weakness. Here are some steps you can take to perform a business health check-up:
- Review financial statements: Start by reviewing the company’s financial statements, including the income statement, balance sheet, and cash flow statement. Look for trends in revenue, expenses, and cash flow, and compare these figures to industry benchmarks.
- Analyze profitability: Calculate key profitability ratios such as gross profit margin, operating profit margin, and net profit margin. Identify areas where the company could improve profitability, such as reducing expenses or increasing sales.
- Assess liquidity: Evaluate the company’s liquidity by analyzing its current ratio and quick ratio. These ratios measure the company’s ability to meet its short-term obligations. A low current ratio or quick ratio may indicate that the company has liquidity problems.
- Examine efficiency: Review the company’s efficiency by calculating metrics such as inventory turnover and accounts receivable turnover. These ratios measure how quickly the company is able to turn inventory into sales and collect payment from customers.
- Evaluate market position: Analyze the company’s market position by looking at factors such as market share, customer satisfaction, and competition. Identify opportunities for growth and areas where the company may be at risk.
- Consider external factors: Evaluate external factors that could impact the company’s performance, such as changes in the regulatory environment or shifts in consumer preferences.
Overall, a business health check-up should provide a comprehensive view of the company’s financial and operational performance, and help identify areas where the company could improve.
Want to know more about strategising your business’s plans for the next financial year? Speak with our KMT business advisers, and let us help you work out the best trajectory for your aims and objectives for the next 12 months.
Learn more about our range of business advice services here.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances and get professional advice from a qualified accountant at KMT Partners.
