Do you know how to determine if your business is financially healthy? SureBooks is here to provide you with excellent accounting and payroll services that will ensure your small business is financially healthy. Read through our seven-minute guide on how to determine the financial health of your business and tips to keep your business financially healthy.
SureBooks and Financial Health:
SureBooks is a small business accountancy agency. We offer accounting and payroll services for small businesses. Our many years of experience in accounting and payroll services enables us to add value to your small business.
Running a small business can feel overwhelming. You need a trusted and reputable partner to help keep your business successful for many years to come. SureBooks will take away the pressure to stay on top of your company’s financial health with our accounting and payroll services.
The financial health of a business is determined by many factors. If your business has various liquidity options, is solvent, is operating efficiently, and is making a profit, then your business is deemed financially healthy.
SureBooks understands how to achieve business financial health. We will offer you advice, accounting services, and payroll services personalised to suit your unique business and ensure financial health.
Areas that Determine Financial Health:
There are four areas of a business’s finances that can be assessed to determine the business’s financial health.
1) Liquidity:
Financial liquidity refers to business assets that can be converted into money. Business assets are anything that adds value to a business and helps aid productivity, increases profitability, and operating efficiency. Business assets are described as either tangible assets or intangible assets.
Tangible assets are physical assets that represent the company’s worth. Every small business is different and will therefore have a different range of physical assets. Tangible assets are divided into current and fixed assets.
Tangible current assets are business assets that do not depreciate and are easy to liquidate. If your company has run into financial trouble and needs cash flow quickly, these assets can be used to supplement income. Tangible current asset examples are cash, accounts receivable, and money in your business bank account.
Tangible fixed assets typically depreciate and are generally difficult to liquidate quickly. Examples of tangible fixed assets include your business’s building, operating machinery, furniture, vehicles, and land.
Intangible assets are not physical but still impact the value of your business. Intangible assets can be divided into indefinite and definite assets. An intangible indefinite asset example is your company brand. Your company brand will be recognisable and add value, but this value will last indefinitely and cannot be calculated.
An intangible definite asset example is a patent. The patent will last for a specific amount of time and thus only add value to your business during that defined period.
The ability to identify your business assets and calculate the value they are adding to your business is important for your business’s financial health. Understanding your assets and having a variety of assets will ensure that your business can survive during financial dips.
SureBooks is a verified accountant. We can assess your business assets for you to determine your liquidity. Understanding your liquidity is critical for financial health as it helps you in situations where you need cash flow or to make decisions for the future of your business.
2) Solvency:
Solvency is the relation of the business’s assets to liabilities. Business liability is debt that the business owes. Simply put, solvency is your business’s ability to pay debts.
Liabilities are categorised into long-term and current debt. Long-term liabilities are debts that are due to be paid in over a year. An example of a long-term liability is a bond.
Current liabilities are debt that is owed within the upcoming year. Examples of current liabilities are accrued expenses, tax, accounts payable, and your payroll.
SureBooks offers excellent payroll services. Our payroll services will ensure that all your employees are paid on time and that your payroll is kept up to date. Our payroll services are also compliant with SARS and the department of labour. Payroll is one current liability you do not need to worry about with SureBooks payroll services.
A financially healthy business is one in which the current assets exceed the current liabilities. If a business is deemed insolvent, or unable to pay its debts, then the business will either have to liquidate the company or enter bankruptcy.
Solvency enables your business to keep operating. SureBooks is here to ensure that your business stays solvent with our accounting and payroll services.
3) Operational Efficiency:
Operational efficiency describes a company that is generating a profit. This is calculated based on the ratio between input and output. A financially healthy business has an output that is higher than the input.
Input refers to what is being put into the business to ensure that it operates. Input includes costs, time, effort, and employees. Output is what is gained from the business’s operations, such as income, new customers, and customer loyalty.
If there are numerous inefficiencies in your business, you will begin to see an increase in costs, reduced profit, and struggle to meet your supply demands. This will then severely impact the financial health of your business.
One way your operations can work inefficiently is through unproductive employees. Employees who are paid inconsistently due to a disorganised payroll system can become unmotivated to work efficiently. SureBooks payroll services are ideal for your business as we will ensure payroll is paid on time to promote productivity in your employees.
A business that operates efficiently will ensure customer satisfaction, and satisfied customers will keep your business financially healthy. SureBooks is here to help you make decisions that will increase your operating efficiency and thus keep your business financially healthy.
4) Profitability:
Profitability is your business’s ability to use its products or services to generate revenue that exceeds expenses. The financial health of your business boils down to the net profitability.
From a short-term perspective, if your business is operating without profit but also not making a loss, then the business will survive for a few years.
From a long-term perspective, your business needs to eventually turn over a profit to remain sustainable and successful.
Sometimes you have to spend money to make money. SureBooks is a partnership that will help grow your business’s bottom line. Investing in the SureBooks accounting and payroll services will ensure that your business is financially healthy and thus have long-term success.
Seven Tips for Financial Health:
We have listed the top seven tips to maintain the financial health of your business.
1) Know Your Financial Health:
Understanding your financial health helps you make the best decisions for the future of your business. By keeping your finger on your business’s financial pulse, you can act quickly if you are facing financial problems.
Hiring a business accountant is an easy way to have peace of mind over your business’s financial health. SureBooks is the account partner for you as we will always keep you up-to-date on the financial situation of your business. Our accounting services and payroll services will ensure that your business stays financially healthy.
2) Outsource:
Clever outsourcing is critical to maintaining a successful business. Very few business owners are experts in all the factors which go into running a business. Find the sectors where you acquire assistance from professionals.
SureBooks is the partner you are looking for as we will always be on top of your business’s financial health. We can focus our attention solely on your business’s finances so that you can turn your attention to other important factors.
One easy way to outsource to SureBooks is our payroll services. Payroll is time-consuming and can be stressful to ensure it is being done accurately. Our all-encompassing payroll services will take away any unnecessary time and effort spent on payroll so that you can continue to run your business.
3) Happy Employees; Happy Business:
Your employees are the backbone of your successful business. Keeping your employees happy will ensure that they arrive to work eager to give their best and help your business succeed.
SureBooks’ payroll services are efficient and compliant. We will ensure all payments are done on time and will keep your employees happy.
4) Increase Operational Efficiency:
Financial health is ultimately based on the amount of profit your business is making. One way to increase your profit is to reduce any unnecessary expenses. You can do this by focusing on increasing operational efficiency.
Many factors can increase your business’s operational efficiency.
Minimise Waste: Minimising waste is important for business operational efficiency. When you use your resources efficiently, you minimise unnecessary expenses for your business.
Organisation: Keep your business organised to ensure that it operates efficiently. One way to ensure organisation in your business is to have supervisors who manage your productions or services. Supervisors will ensure that there is minimised waste by preventing bottlenecking in production or that the services you are providing are efficient and effective.
Distribution: If your company produces a product or offers a service, the distribution of this product or service is done timeously. Efficient delivery will reduce any returned products, spoiled products, or need for refunds on services-not-delivered.
Inventory: Operating efficiency ensures that your business is producing enough products or services to meet your demands without excess. Excess products can spoil and thus become an unnecessary expense.
5) Maintain Solvency:
There are very few businesses that do not have liabilities. Managing your liabilities correctly is an important way to maintain the financial health of your business. We have selected a few tips to help manage your current liabilities.
Sell Assets: Find business assets that are high in value but will not affect business operations and sell them. Use this quick inflow of cash to settle your debts.
Increase Sales: Work towards making your business more profitable by increasing sales over a long-term period.
Repayment Scheme: Devise a repayment scheme with your business’s creditors. Create a repayment scheme that allows your business to still operate whilst working towards reducing debt with your creditors.
SureBooks can offer specific advice to help achieve financial health in your business.
6) Focus on Growth:
Maintaining your business’s financial health will enable you to make calculated decisions regarding the future of your business. Financial health also enables you to act on opportunities when they arise for your business.
Another way to grow your business is through promotion. Invest in suitable marketing strategies to increase awareness of your business. This will be an initial expense, but the output will be worth it. Increased customer acquisition will mean an increase in business profitability and thus financial health.
Keep your business financially healthy by using SureBooks accounting and payroll services and our top tips.
