Four Questions To Determine The Financial Health Of Your Business

Do you keep track of your business’s financial health? One of the steps to take to find out if your business is doing well is answering some key questions. These questions will help you verify if there is a need for you to make some changes in your strategies. Assuming that your business is heading towards a positive direction can lead to a serious disaster as you do not have the figures to support your claims.

Are you ahead or behind on your monthly goal?

Hitting your monthly targets is one indicator that you are keeping your business on its feet. There are many ways to determine if you are ahead or behind on your monthly goals and one of which is comparing your month-to-date sales and expenses with your end-of-month goals. With this technique, it will be easier for you to identify if you are still on track.

Do you pay your bills in a timely manner?

It is also worth checking your accounts payable and cash balance. Just because a business is profitable does not mean there is nothing for you to worry about. Even profitable companies run out of cash. The good news is you can prevent falling behind of your payment schedule by ensuring that you keep an eye on both your major payables and monthly burn rate. This way, you will have the ability to pay your bills regularly.

Are you spending your money wisely?

Problems with your cash flow can have a negative effect on your business especially if you do not monitor your expenses. Make sure you closely monitor your monthly ongoing expenses and compare last month’s actuals to your projections. You will be able to generate valuable discussion once you keep records of your expenses.

Do you have enough cash?

It is also essential that you have enough cash to get to break-even as it is considered a major milestone that requires regular monitoring and adjustment. Some of the important things you need to close track include your net profit and business plan projections. You will be able to get a better picture of your business’s trend review your financial statement. One of the ways you can raise money is by cutting your expenses.

Answering these key questions will help you determine which direction your business will take. There is a big difference when you are completely aware of your financial standing because if you decide to grow your business, you can sleep soundly knowing that your business is on the right track.

Tamara Deterding

Written by : Tamara Deterding