A company’s ability to scale and reach its growth goals is heavily dependent on its financial health. Will your company be able to pay the bills three months from now? What are your revenue projections three years from today? Are you confidently hiring new employees, or are you concerned about growing the team too quickly? When a company is financially healthy, these answers are easier to come by and realistic.
Companies that could be financially healthier face the risk of running out of funds, burning out employees, losing out on strategic opportunities, and being disappointed when trying to meet customer and/or investor demand. Being financially healthy means having a clear financial picture so that you can confidently take action when appropriate.
How Do I Improve My Company’s Financial Strength?
Pre-revenue companies or companies that are not flush with cash at the moment can be financially healthy—if they are aware of their current financial situation and what they need to do to improve it. An inward assessment, guided by finance experts, is the first step toward the financial health of the company and starting the process of how to improve its financial health. These other tips can help too:
1. Know the roadblocks: Watch out for inefficiencies
If multiple people are caught up in mundane matters rather than their core responsibilities, that’s one of many signs that inefficiencies could be hampering the company’s progress. When a company has the right systems and processes in place—that fit with its size and complexity—much of leadership’s focus can be put onto moving the company forward. Leadership would have reliable, timely information to base their decisions—otherwise they may be bogged down by wondering if they can trust the information they’re viewing. When they are fully informed, they have context and insights around the financial data to speed up their decision-making process.
2. Aim for increased visibility, to avoid unnecessary problems.
If the finance function is overwhelmed or being slowed down by technology that has not kept up with the company’s pace of growth, there’s likely a lack of visibility into what’s really going on in the business. In the near term, this means the company may not realistically know if it can make good on its financial obligations. It could be missing out on opportunities to improve its margins and achieve healthy financial ratios. At a larger level, a fuzzy view of the current state of affairs and the path forward hinders the company from making choices that can improve its way of operating and taking smart steps toward growth.
3. Invest in technology that will improve efficiency and productivity.
The company may have started out with a system that worked for a while, perhaps for the first bookkeeper and accountant on staff, but it’s long overgrown being able to rely on Excel spreadsheets or the basic capabilities of QuickBooks. Strengthen the technological backbone with a tech stack of integrated applications that cut back on manual entries (and all the risks that come with that practice) and keep all the areas of finance—including invoicing and payroll—running more smoothly.
An outside perspective from outsourced accounting and finance experts can make the process of selecting and implementing tech solutions seamless. They have used a variety of software at a range of companies and can recommend the mix that could best work at your company, without the bias of “this is how we have always done things.” They can also provide training to ease the transition period.
4. Manage cash flow effectively to ensure you have enough funds available when needed.
The importance of cash flow cannot be overstated (cash is king after all!) yet it’s often a problematic area as emerging growth companies work toward putting themselves on more solid footing. When improving the financial health of the company focuses on improving visibility, this will greatly help with the ability of the company to fully see its incurred expenses. Otherwise, there’s the risk of spending more or sooner than you should. Being able to consistently produce reliable budgets and forecasts, and a cash flow statement, will make it so that the company can minimize such surprises. Companies also need a robust collections process and adequate cash reserves. If these are a current weakness, finance experts can introduce improvements to get the company on the right track, so that missed payments are no longer a common concern.
5. Bring in or know how to access finance experts who understand your business.
When you are in the thick of running the business or simply trying to focus on your day job, the problematic issues or weaknesses within the company that can be affecting its financial health may not be obvious. An expert, objective view can help to pinpoint where improvements can be made, and then help you implement changes so that you can soon focus on the core work at hand. Your company will be financially stronger as a result and able to take advantage of strategic opportunities.
Determining the Financial Health of a Company
The critical areas affecting your company’s financial health can be quickly revealed through a financial health assessment. RoseRyan’s Rapid Assessment for Emerging Growth assesses 16 essential areas, from growth plans and competitive concerns to processes and systems, to financial obligations. It’s a starting point toward strengthening the company’s financial health.
Sign up for your rapid assessment with RoseRyan today. After a dialogue with us, you’ll have an insightful report on areas of your finances and operations that could use some sprucing up—and a baseline to see how far you can take your company.