With it often being relatively quiet and representing a fresh start, what better time than the New Year to review the performance of your business? Here are some ways to go about it:
Ask questions
The review is a time to focus away from the day-to-day running of a business and look at long-term strategic planning. This starts with reviewing the performance of the company over the last year,
In a performance review, there are some questions to ask yourself:
- What are my markets? Could I expand into other market areas?
- How do I gain market advantage? For many entrepreneurs, being profitable is not enough; they want the best products so that they become the market leader
- How am I measuring success and failure? Success is not just a matter of short-term profits, but is also about customer service, employee relations and long-term profitability.
- Will my products and services remain relevant in the future? Consider matters like how some very successful manufacturers of photographic film have coped, or failed to, once digital photography arrived.
- Are the business systems efficient? Improving manufacturing processes or how services are delivered can improve efficiency.
- Have I recruited the best staff? The key to business is hiring quality staff who significantly contribute to the performance of the business.
Working capital
One measure of your company’s performance is working capital, which is an evaluation of your company’s short-term financial health. It is calculated by subtracting your current assets from your current liabilities.
For many companies, working capital follows a cyclic trend. For example, businesses often have their busiest trading period in the Christmas period followed by a lull in January.
Another factor affecting working capital is waiting for invoices to be paid. After a few days’ shutdown over Christmas and New Year, many business take a while to catch up on paying invoices.
A healthy business always has more assets than liabilities. If there are periods when liabilities exceed assets, urgent steps need to be taken to make sure that creditors can be paid. This may mean increased borrowing until business picks up. An invoicing company can be used to pay you for unpaid invoices.
Growth
After establishing a healthy working capital, review how to grow the business.
To help review your company’s financial performance, it’s a good idea to use a management accounting service to advise you on how to keep your business financially healthy. Why not speak to Sollertia to find out how our expertise can help?