When we start work with a new client we always begin with a financial health check.
You’ve got to be a bit brave to confront financial realities. Uncovering the things that aren’t visible but are affecting your bottom line, the value of your business and your entire financial future takes courage.
But hey, you’re a business owner, so brave goes with the territory!
And to be honest, it’s not for everyone.
It’s for people who are serious about their future. Who want their business to be successful and their efforts to amount to something tangible.
It’s not for people who can’t take the truth, and aren’t willing to do what it takes to build solid financial success.
Last week I talked about our financial strategy process, and how we’re sharing it so you can put your business through it… if you’re brave enough.
We always start with the financial health check. It’s a thorough 130-point diagnostic designed to shine a light on everything that’s affecting your financial strength and performance.
We begin here, rather than diving into ‘fix’ mode, because you have to know your start point and any invisible, lurking issues.
Ready to be brave? These are the areas you need to check in your own business:
- Accurate data – we’ve rarely found a client with accurate book keeping. Automated packages make the issue worse, because you believe you don’t need to understand accounts – a dangerous assumption. If your data isn’t correct then any information you use to make decisions will be wrong.
- Processes and controls – these tend to be weak in a lot of small companies and can be financially costly, as well as inefficient. Cyber fraud is misunderstood and businesses are open to internal and external fraud. We also check process and control around things like VAT, payroll, monthly controls and the accuracy of your balance sheet.
- Authorisations – do you have strong controls to make sure all expenditure is properly authorised – important for overhead control as well as protecting against internal and external fraud.
- Protection and support – everything from having the right accountant, to cyber-crime protection and shareholders agreements.
- Financial skills and capabilities – finance is often the last skill trained into a business. And yet every single thing, that every person does, every day, has a financial impact. Assess the skills of your finance team, management team and the MD or CEO. This shows up immediate opportunities to make the business stronger.
- Weekly and monthly management information – having correct and accurate information to hand, every week and month, is absolutely critical if you’re trying to build a business. Have you got the right information on cash flow and current trading every week? Have you got the monthly visibility you need to make smart decisions? Do your accounts forecast how much profit you’ll make this year? And is your information tied to your personal financial strategy?
- Building value – are you using your financial strategy to make sure you’re building the value of your business, looking at the profitability of your customers, services and products, knowing what the value drivers are?
- Financial health – stand back and take an objective view of the financial health of your business – your cash flow, profitability, balance sheet strength and credit rating.
- Sales and marketing – no business works financially without a robust marketing strategy, one that’s executed consistently.
- Your vision for your future – have you defined what you’re really working for? What you want life to look like? And have you got your finances mapped out to show you exactly how to get there (beyond hard work and hope)?
Putting your business through a financial health check is the start of making real change. Knowing exactly where your risks and opportunities are. It’s the start of a process that will transform your financial future – if you’re willing to act on what you find out and work consistently on the right things.
The lightbulb moment
For our clients their health check day is always the lightbulb moment. They can see in black and white (or rather red, amber and green) their business reflected back at them. They can see their weaknesses and what’s working well.
They can see exactly where they need to put their attention to make fast financial progress. And yes it can be scary but when you confront where you are, you’ll know every step to make your business stronger and more valuable.
So I wonder if you’ll be brave enough to health check your business? What would you find out? And how could it change your future?
I’d love to hear how you get on.