Is your Financial Performance Healthy?
If someone asked you about your company’s Financial Performance, what would you say? This is one of the simplest Value Drivers, yet one of the most difficult to deliver on.
A healthy financial performance will drive saleability, but it’s vital to remember that this isn’t solely about the numbers. Of course, your top line revenue and overall profit are taken into consideration but if you’re looking to add value or sell then look at the bigger picture.
Do the numbers add up?
Are your records solid? Presenting your figures plays a big part in this value driver. How detailed you are and how thoroughly you report these figures shows careful consideration and organisation.
You might be thinking that how they’re presented doesn’t matter as long as your business is profitable. Whilst a profitable business is preferable and likely to attract more attention, the flip side is sustainability. Reliable figures are important, you need to be able to defend your figures if they are to be scrutinised by a potential buyer.
For larger businesses, consider investing in an audit. This would involve a third party going through your records with a fine-toothed comb. Not only could this highlight ways to improve your record keeping but it could also bring to light facts about your business finances that you weren’t fully aware of.
Room for Improvement
Whilst it might seem daunting to allow a third party to perform an audit, it will highlight any red flags for your company. You then have the choice to clarify or correct these before selling the business.
There are some key approaches you can make to improve your company’s financial position and strengthen this.
- Do away with debt – Do you have clients who owe you money? Crack down on outstanding balances and ensure a condition of sale agreement or contract between you and your customer/client is in place, clearly stating payment terms.
- Consider your overheads – What could you move around in terms of your outgoings? Would switching suppliers see you claw back any revenue? Even considering your office environment and outgoings such as stationery or energy bills may be worth exploring to find cheaper alternatives.
- Checking Cashflow – Does your accounting system make cashflow simple? Regularly view your cashflow statement to give you a detailed outlook on both incomings and outgoings. Putting processes in place to follow up on overdue invoices and encourage prompt payments will also help to keep outstanding balances to a minimum.
The Financial Performance value driver primarily focuses on your history of creating and sustaining revenue and profit. Yet, this also looks at the competence of your record keeping. Therefore, don’t underestimate how important it is to clearly present your finances to a prospective buyer and be able to defend the reliability of your figures.
There are plenty of other options to consider to improve your financial performance. Contact us today in confidence, to see where your business fits into the Financial Performance score in our Value Builder.
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