Sometimes, it can be difficult to tell if a business is prospering or merely surviving. Even with consistent sales and smooth daily functioning, deeper numbers suggest a different picture sometimes. An accounting services specialist can reveal these tricksters early on and help steer your company into sustained financial health.
Knowing your financials is not just about being aware of cash flow—it’s about understanding where it is coming in from, where it is going, and whether it’s working for your benefit.
Signs Your Business Is Financially Healthy
By all means, a financially healthy business is not without its imperfections. However, it does show strength in most of the following fundamental criteria:
1. Positive Cash Flow
More cash is coming in than going out. This means that your operations sustain themselves, and you do not have to depend on getting loans or credit to keep afloat.
2. Steady Revenue Growth
Your income is up, even if minimally, month over month or year over year. There are regular seasonal fluctuations, but an overall positive trend should be in place.
3. Controlled Expenses
You are familiar with your operational expenses, keeping track of them. Rarely are there unexpected bills, overshadowing your operations with excessive overhead.
4. Manageable Debt
You’re not in a situation where debt is controlling or consuming you. Debt repayments are comfortably fitted into your cash flow, and credit is not maxed out.
5. Accurate Financial Reporting
Your financial reports (income statements, statement of financial position, and cash flow statement) are regularly updated and reviewed by you—and you understand what they mean.
Red Flags That You’re Just Getting By
The following signs may indicate that your business is only just getting by:
- Cash flow shortages occurring often, especially before payroll or after monthly bills
- Poor financial strategy; decision-making driven by feeling rather than factual data
- Bills or vendor payments constantly accumulating overdue
- Relying on personal finances to support business operations
- Regret over not filing financial statements or being unable to understand them
These challenges may not feel like an emergency—until they become one. By then, recovering will be tougher (and pricier).
What Improvements You Can Make
If you are uncertain as to where your business stands financially, this is the moment to spring into action. How to get the ball rolling:
Assess Your Financial Reports at the Moment
Take a close look at your income statement, balance sheet, and cash flow statement to understand your current position. Identify trends, oddities, or anything that you do not understand.
Invite a Professional
If you are having trouble interpreting your financial statements and planning a viable business strategy, you do not want to wait until tax season. A professional will assist you with making informed decisions promptly throughout the year.
Invest in Financial Clarity Today
Nobody said running a business would be easy—and having to second-guess your financials makes it all the more difficult. Partnering with a trusted financial person could give you the leverage to change your growth potential drastically. Review your financial health, and if any issues arise, consult a trusted accounting expert to resolve the conflict.