Why you need a financial health check

November 2020

How healthy are the finances of your organisation?

Much like a medical health check, a financial health check is something that should be done on a regular basis. A financial health check involves a robust analysis of both your profit and loss and balance statement over a multiyear period, usually three years.

Here’s seven reasons why you should conduct a financial health check.

Early detection

Identifying financial issues at an early stage before they develop into more serious, potentially irreversible issues, can in some cases be the difference between an organisation surviving or not.

Early detection allows for early actions to be taken. This is particularly important for an organisation that is growing as issues can scale with the organisation, making them potentially even more threatening.

Clarity

Interpreting numbers and reviewing results from an organisational strategic perspective over a longer time frame can be confusing at the best of times. Additionally when reviewing your numbers in this perspective, knowing what to look for and why requires a level of expertise. A financial health check, conducted by a financial professional, provides clarity over your past results and presents your finances in an easy to understand manner.

With a better understanding of your numbers, you and your board are able to make more impactful decisions.

Independent expert

A medical health check is best conducted by a medical professional. The same is true of a financial health check. A finance professional has the expertise to review your financials, know what to look at and what past results could mean for the future.

Additionally, someone that is independent to your organisation will be able to have a more objective view and bring learnings from other organisations, such as best practices and benchmarking benefits, into their financial health check

Strategic view

A financial health check forces a longer-term strategic view to be had. When reviewing the results of your financial health check, questions such as “how happy were we with our past results” and “what would we like our future results to look like”, will inevitably be asked. This strategic mindset – with a particular focus on finance – is highly beneficial in your overall strategic planning and decision making.

Save money

A financial health check may reveal ways in which money can be saved. Additionally, if future financial issues are detected and addressed early, significant future costs may be saved.

Collaboration

A financial health check and the results it produces allows for leadership teams and boards to collaborate and discuss key areas within the financials of the organisation. Often regular board meetings focus on current year financial performance against budget, whereas a financial health check will allow discussions to be had around financial issues that may not be present in a budget, such as your organisation’s ability to convert revenue to cash in a timely manner.

Time horizon

A financial health check is usually conducted on a multi year time horizon meaning that trends can be more significant. This allows for a longer-term view to be had of the past, which inevitably leads to a bigger picture view of where the organisation would like to be in the future.

If you are interested in obtaining a financial health check, please call 1300 763 505 for an initial obligation free consultation with Dimitri.

Dimitri Matsouliadis
Business Consultant
Email: dmatsouliadis@cbb.com.au
Phone: 1300 763 505

Book a free 30 minute initial consultation with Dimitri