How to check the financial health of your business
It’s important to know how your company’s finances are performing. You’ll be able to make the right decisions for your business, and ensure you’re able to grow. So, how do you check up on your financial health?
There are a few different ways you can use to measure the financial health of your business. Using these tools together will give you an accurate view of how your business is performing, and if there are any areas you need to improve.
Calculate your profit
Profit is the amount of money your business gains once all the costs have been removed. Your profit will show how efficient your business is, and how much money you’re making that you can invest in growth.
The easiest way to check your profit is by using a Profit and loss report. You can see how if you are making or losing money, and break it down by where the money is coming from or going on. Accounting software with automated reporting is the easiest way to check your profit. You won’t need to do any calculations to see how your business is performing.
Check your cash flow
Cash flow is the money moving in and out of a business. A positive cash flow means you are making more money than you are spending. A negative cash flow means you are spending more money than you are making.
To check your cash flow you’ll need to take a look at your accounting on a regular basis. Compare your total sales with any money owed to you, and any purchases you still owe money on. This difference is the amount you will need to raise to create a healthy cash flow.
Compare budgeting and forecasting
Budgeting and forecasting are two ways to plan your finances for the future. When you do budgeting and forecasting at the start of a period, you’re able to compare your projections with your actual finances and see if you’re on the right track.
By regularly comparing your revenue with your budget, you can decide where you need to take action to reach your goals.
Reporting is the easiest way to check in on how your business is performing. When you use accounting software like Bokio that generates automated reports, you can see your finances at a glance.
Along with the profit and loss report mentioned above, you can use your balance sheet report to check your financial health.
The balance sheet shows the company’s financial position at a certain point in time — which assets are financed by equity and what proportion are liabilities. You can use this report to help measure your cash flow.
Manage your invoices
Remember to check in on your invoices and see if there are any that are overdue. The easiest way to do this is to use an account software that notifies you when any invoices are overdue.
Keep track of any late payers, so you can plan ahead for any overdue payments or take action to discourage them in the future.
Ask an accountant
Sometimes you need professional expertise to help you make the best decisions for your business. Accountants can offer advisory services to check the financial health of your business, and guide you on how to improve it.
Manage your finances with Bokio
Bokio has all the tools you need to help you keep your business in good financial health.
Bokio can help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with. Or, you can invite your accountant to work with you in Bokio.
Accounting is kept simple with Bokio, so you have more time to spend running your business.