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Financial health checklist for your business

By Winnie Makena | July 7th 2021

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” This is a famous quote by Robert Kiyosaki, author of Rich Dad, Poor Dad. It rings true to business as with life and is the reason you need to check those daily decisions you make which impact your bottom line. While you cannot completely determine how healthy or sustainable your business is, the following is a checklist you can use to evaluate your financial health as a small-business owner.

1- Revenues

These are the sales or the amount of money your business earns before any expenses are taken out. Profits come from revenues that are higher than expenses. Every business needs revenue goals. If you fall short, you need to figure out what happened and how to avoid it. If you surpass the sales target, you need to know what you did right so you can replicate it.

Have a budget. Budgets help businesses predict the amount they’ll earn and ensure they have the financial means to cover fixed and variable expenses. If your accounting software offers budgeting tools, use them.

2- Receivables

Accounts receivable is the money that your business has a right to receive because it has provided customers with goods and services. Now monitoring receivables and following up on past due invoices can be a pain but making sure customers pay their bills is a surefire way to minimise losses. Have a clear policy on overdue accounts and follow through on collections, even if you have to outsource it.

3 - Your debt situation

You most likely secured a business loan to help you grow. You’ll want to look at your debt to total assets ratio when assessing your financial health to see just how much debt you’ve accumulated. Use a simple formula to calculate your debt to total assets ratio: Value of Debt/Value of Assets (Divide how much you owe by the value of your assets. 

“Generally a good debt: equity ratio is 1 and below, but above 2 is risky,” says Mercy Waithira of BlackRose financial consultancy. 

Companies that have a higher debt to total assets ratio are more likely to be riskier and financially unhealthy.

4 - What’s your Business Classification? 

Maybe you started out as a sole-proprietor, but you’ve grown enough that it makes sense to file as an LLC. By doing so you take advantage of tax savings. Speak to a CPA certified accountant or lawyer to perform a cost-benefit analysis.

5 - Do you have an emergency fund?

An easy way to know your financial health is if you are cushioned from an unexpected blow. A great example is when the coronavirus pandemic hit. A business in good health had three months in its emergency fund to allow for safe transition to either a different location or close shop temporarily. Those without had to quickly close shop without any foreseeable income to help reopen once the country opened up. 

Experts recommend three months of business expenses set aside to weather the storms that may arise. 


Inability to pay your debts

Are you paying more debts than collecting income? Then this is a sign you’re in trouble. It’s time to increase cashflows by preparing weekly cash flow forecasts. This helps to plan what has to be paid and when it’s due to be paid. You could also speak to your bank about getting a loan overdraft to stay afloat. Consider selling old or excess stock. Last, asking for a debt to be repaid by a customer is uncomfortable, but having solid procedures in place for collecting outstanding debts will help get them paid in time.

Poor profitability

The first sign of trouble is getting no profits. Start to monitor profit, considering areas like your gross and net margins. This means check your stock prices and on costs and review expenses regularly to ensure that you are passing on any increases to your customers if possible. For instance during Covid-19, imports cost more while the supply was low. If you don’t trickle down the extra expense to your customers you will have cashflow problems in future. Your sales are the backbone of your business. Check how you retain existing customers or how you attract new ones. Perhaps you offer discounts to attract business. Consider changing tactics to offering after sales service or discounts for volume based sales. 

Cannot access finance

Businesses need money for all sorts of things and not accessing it is the start of the end of your business.

Having a finance facility in place that’s available when finances get tight is a goodcontingency plan.

Maintain a good relationship with your bank so that you can approach them when you need finances. Keep them in the loop on your business operations. Second, make hay while the sun shines. This simply means looking for a finance facility when the business is showing good profit and cash flow.

Losing and replacing staff

You aren’t a bad boss but your staff just won’t stay despite you training them and paying them well. This is eating into valuable company resources. To mitigate this, spend extra time in recruiting to find talent that is the right fit for your business. It’s not just about qualifications. You may need staff that is flexible to working hours, or a team player. Also make your staff part of your business so they will be committed to your goals. Last, have a working culture that rewards your staff making them feel supported and appreciated.


Knowing your business is failing is easier to pinpoint because all you have to do is look at the money. As for success, it may be a little unclear. Here’s how to know you’ve got something going beyond survival.

Customers refer you

Most successful businesses work on word of mouth referrals. It is the highest compliment your business can receive because it means your product or service was so good your clients advertise you for free. 

You achieve positive cash-flow

Positive cash flow is when you receive more cash than you pay out. A positive cash flow gives the business the time to succeed and opportunity to reinvest profits for future growth.

We make the mistake of assuming that immediately we start a business the profits will start rolling in. In reality it may take months before you break even, and even more time to start seeing positive cashflows.

Your business is scalable 

This means that your business has the potential to multiply revenue with minimal incremental cost. To have a scalable business, start with an idea that is scalable. The idea should be based on serious market research. Secondly your business plan should be attractive to investors which is achieved by having high margins (over 50 per cent), low support, and minimum staff. If your business plan involves a lot of free service to customers, it may repel investors. Lastly, be able to automate. Think of the banks that are able to onboard new clients to their apps without needing to physically go to the bank. They grow faster. Start early looking at production automation, proven process technologies, and minimum staff approaches.

News media takes notice of you

At Enterprise, we cover from time to time businesses that have achieved great success or are in the right path to it. These businesses have unique ideas that are profitable or have used expertise in a traditional business to make it outstanding. If you are identified as a thought leader, it is a good sign that your business is successful. Do people regularly ask you to be a speaker on a panel, judge prizes or give speeches at local business events? You are a thought leader, which you can leverage to be a side business on its own. Furthermore, a news article is likely to market you as it demonstrates your credibility.

How often should you do a checkup?

Typically every quarter. If your checkup uncovers a lot of room for improvement, don’t try to fix everything at once. Try setting three goals and three key activities to help you reach your goals and keep your business growing and thriving for years to come.

Why your business’ reputation matters

It is said that it takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

While reputation matters offline and offline, the internet is ever developing and becoming the easiest avenue to share reviews and for companies to influence their digital reputation and credibility. Think about your marketing for instance. You share your business vision with everyone at every available moment. You pay newspapers and radio to talk about you. You may even get influencers to push your new product to social media channels. Ultimately all these potential customers are driven to one place; Google. What they find there is what will shape their opinion of your business. Are you credible? Can a business trust you? Your online reputation affects your offline perception. And the data backs it up. According to Spiegel Research Centre about 95 per cent of customers read reviews before making a purchase. That’s not all. 72 per cent of customers will not even take any buying actions until they’ve read reviews.

Does it translate to more revenue? 

What many business owners want to know is whether their good reputation will turn into money. Well, yes. When higher-priced items display reviews, the conversion rate increases by 380 per cent. Peer recommendation is the easiest way to get your already good product on people’s mouths. And negative reviews are just as bad. On average, 19 per cent of reviews a business receives are negative. That’s okay, because a few negative reviews give depth and insight into a product which is ultimately a good thing. However, according to a 2020 Local Consumer Review Survey negative reviews can stop an average of 40 per cent of buyers from wanting to buy from a business.

Fix a bad reputation

Own the past. There is no point in denying what is already out. Address the elephant in the room, apologise and make clear your plan to make it right.

Control the conversation. Catch the negative conversation before it gets out of hand. Cytonn has been facing liquidity challenges but it only became a crisis when a disgruntled investor reached out to bloggers and social media.

Check your social media response. If a company ignores the negative review it may be perceived to not care. If the response is emotional it alienates the clients. Have analytics in place to help make an informed decision.

Monitor complaint platforms. Surges in traffic from websites like Reddit, where users can deliver anonymous content, can indicate a potential crisis developing. Check websites like Glassdoor for employee complaints.

Be patient. Building a good reputation doesn’t happen overnight. And rebuilding a damaged one is an even longer process.

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