Assessing a Company’s Financial Situation

By outward appearances, a fast-growing company can seem to be incredibly finally strong if it’s been able to, say, win over a large number of new customers in a short amount of time or quickly expand into another geographic location. But if the financial health of the company does not match up to these developments, it could be in for a rude awakening. It may turn out that the company is not able to fully support all those customer orders, it can’t pay off its loans for funding the expansion, or it’s about to run out of cash.

Ideally, just like you should go to the doctor for regular checkups, the financial health of a company should be regularly evaluated. Find out whether the company is on the right track or needs to make some adjustments. Determine the company’s ability to create and monitor its financial objectives. Companies that lack a solid financial foundation have an incomplete financial history and a loose understanding of business performance. Companies unable to close their books in a timely way are in this financial situation.

The Most Important Factor for Determining Financial Health

So, how financially healthy is your company? The answer depends on this critical factor: visibility. All companies need visibility into where the money is going, its revenue, the state of its cash flow, and the costs that go into running the business. Timely, accurate financial reporting provides the base for knowing this information and gauging how the company is doing.

Financial records can be dissected and analyzed to get at understanding whether current decisions are sound and helping decision-makers make the right choices for the company—whether that’s to move forward with a particular initiative or make a directional shift in the current plans.

What Is Financial Health?

Many factors can affect a company’s financial health assessment, or its ability to continue to thrive in today’s current market and sustain growth. Can it meet its short-term and long-term financial obligations? Is it profitable (since not all companies are, solvency is an important consideration)? Is it operating efficiently, or could the finance operations use an overhaul? The following aspects of the finance function need to be in place for a company to keep tabs on these factors and its overall financial health.

Having the right systems and processes in place. Is the way the company collects and processes information meeting its current needs, or has it become inefficient and prone to errors or data gaps?

Reporting and projection capabilities that keep up with the company’s growth. Does the company have reliable financial records? As companies grow, they also need to upgrade their systems (early on, homegrown spreadsheet systems no longer cut it). And does the company have financial and accounting expertise on hand to turn its financial data into useful insights for making smart decisions and thinking through strategies?

A skillful finance and accounting team. The makeup of the finance function will fluctuate as a company grows (a part-time controller and a full-time bookkeeper could be a perfect fit for a smaller business, for example). What matters is having access to the right expertise, at the right moments. The finance function provides the backbone of the company’s financial health and requires a mix of finance and operational experience to ensure the company’s directional moves are supported.

Financial Health Services: How to Improve Your Financial Health?

At RoseRyan, we help VC-funded companies determine their financial health through the RoseRyan Rapid Assessment for Emerging Growth. This interactive, specialized tool assesses 16 areas of financial health of startups and helps these companies see where there are cracks along their financial foundation. These findings can inform the start of a recovery plan or provide affirmation on current finance operations.

Oftentimes, companies need an outside, fresh perspective to see the financial and operational risks to their growth goals and opportunities they may have overlooked. We have found financial health assessments to be a good way to get to know a company—at every stage—and to reassess their progress over time. Knowing current financial and operational strengths and weaknesses helps to determine whether your current plans are sound—and what needs fixing—so you can move forward.


Is it time to assess your company’s financial health? Contact our finance and accounting consulting firm to fully understand your financial situation and gain valuable insights on how to improve it.