Health is Wealth: A Guide to Conducting a Financial Wellness Check for your Company

January is Financial Wellness Month! While the spirit of this “celebration” is intended to turn the focus onto your individual financial health, ensuring the financial health of your company is a critical aspect of sustainable business management. Conducting an annual Financial Wellness Check is akin to your annual physical – a comprehensive health checkup for your organization. If done well and with intention, it allows you to assess fiscal strengths, identify potential risks, and start the process of designing/implementing strategies for long-term financial well-being.

Here are some steps you can take this January to perform a Financial Wellness Check for your company:

1. Establish/Review Clear Financial Goals

Before diving into the specifics, it’s essential to define clear financial goals. These should align with your overall business objectives. Whether the focus is increasing revenue, reducing costs, or optimizing cash flow, having well-defined goals sets the foundation for an effective Wellness Check and provides you with the opportunity to measure success more frequently than once per year. Review prior-year goals, adjust where appropriate, and set new goals for the coming year.

2. Review Financial Statements

Start by thoroughly reviewing your company’s financial statements for the year and as compared to previous years. Ideally, you have been reviewing financial statements regularly throughout the year, but during the Wellness Check, spend time at the big-picture level. Analyze revenue trends, expense trends, and cash-flow patterns. Look for anomalies or areas where you have veered off-track or failed to meet financial goals. Notice and celebrate where you have exceeded goals and look for ways to replicate this performance.

3. Budget Analysis and Forecasting

Analyze your company’s budget to ensure alignment with your financial goals. Evaluate the cause of budget variances and adjust future budgets and goals accordingly. Implement forecasting models to anticipate future financial scenarios and develop mitigation plans where necessary. Ensure that your company remains agile and responsive to changing market conditions.

4. Evaluate Cash Flow Management

Cashflow is the lifeblood of any business and adequate cashflow is essential for both day-to-day operations and long-term sustainability. Evaluate your company’s cash flow management to ensure that it aligns with your financial goals. Examine the timing of cash inflows and outflows, identify any potential inefficiencies, and implement strategies to maintain a healthy cash position. Set clear cash flow and cash balance goals.

5. Assess Debt

Review your company’s outstanding obligations; especially debt. Evaluate the terms, interest rates, and payment schedules. Assess the impact of debt on your overall financial health and explore opportunities to optimize debt management. This may involve refinancing at more favorable rates or developing a strategic plan for debt reduction. Renew or adjust any maturing lines of credit, if appropriate.

6. Analyze Operational Efficiency

Examine your company’s operational efficiency by assessing key performance indicators relevant to your industry. Identify areas where operational improvements can be made to enhance efficiency and reduce unnecessary costs.

7. Conduct a Risk Assessment

An annual risk assessment is a great way to check in on potential risks that could negatively impact your company’s financial stability. This includes internal controls, market risks, cash concentrations, and external factors that may affect your specific industry such as regulatory changes. Develop contingency plans and risk mitigation strategies for any areas where risks are identified and establish a timeline to implement them.

8. Continuous Monitoring and Adjustment

Financial health check-ups should be an ongoing process. Implement systems for continuous monitoring of and adjustments for items that surface during your Wellness Check. Regularly revisit your financial goals, assess progress, and take necessary action. This approach ensures that your company remains resilient and adaptable in the face of evolving financial realities.

9. Consider Engaging Financial Professionals

Consider enlisting the expertise of financial professionals to conduct a thorough Assessment of your company’s financial health! These insights can provide valuable perspectives, identify blind spots, compare your financial health to your peers, and offer recommendations for improvement. Insource would be happy to engage with you for a Finance Assessment to assist with any or all of the above components of a Financial Wellness Check, and/or the implementation of recommended actions.

To learn more, reach out to us at insource@insourceservices.com or 781-235-1490!