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Business health checks

Subjecting your business to a financial health check can be transformative if recommendations are acted upon.

Motivations for undertaking a business financial health check are almost as numerous as the firms offering the service and are not always purely commercial.

While the purpose of the exercise is to identify areas where the business can be more efficient, it is not uncommon for requests to come on the back of a change in personal circumstances. Health or relationship issues or an application for non-business finance, such as a mortgage, can all be factors, according to Rob Ellis, managing partner of Welch & Ellis.

He says that once the objectives have been determined, the next step is a fact-finding process to  establish the current position: “Ideally I would want to be able to look at two years of accounts, but the more information the better.

“It’s also important to listen to a client’s concerns as only then do you pick up on what is needed and where their priorities lie – I often say that part of this job is being a therapist.”

Ellis reckons many businesses fixate on accounting ratios, rather than looking at the big picture and remembering that, in order to facilitate growth, costs will increase in the short term and it may take a while to see a return on this investment.

“Costs often have to jump up significantly, which may cause unnecessary concern,” he adds. “On the flip side it’s fair to say that many businesses underestimate the significant ‘sickness’ that may come with growing too rapidly or over-trading. Growth is sometimes wrongly seen as a positive as long as the money is coming in. Don’t be a busy fool.”

This is an extract from the Business & Management Magazine, Issue 268, October 2018.

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