“We’ve just had our best month ever.”
We hear business owners say this all the time, and it is something worth celebrating. More sales, more customers and growing revenue are all positive signs.
But then we ask a few more questions.
How much profit did you make?
Suddenly, there’s not always a clear answer.
How much tax do you have coming?
“I’m not sure.”
What does your cash flow forecast look like over the next six months?
“No idea.”
And this is where the difference between business growth and financial health becomes important.
Revenue Isn’t the Same as Financial Health
Growing revenue can feel like the ultimate measure of success. You are making more sales, bringing in more customers and potentially hitting new monthly records.
But revenue only tells you how much money is coming into the business. It doesn’t tell you how profitable the business is, how much cash you actually have available or what financial commitments are coming next.
A business can have its best month ever and still have financial problems.
You might be generating more sales but spending more to deliver them. Or you might have outstanding invoices that haven’t been paid yet. You might have a large tax bill coming up that hasn’t been accounted for.
That’s why revenue and financial health are two very different things.
What Does a Financially Healthy Business Look Like?
A healthy business doesn’t just have a vision for where it wants to go. It understands the financial position that will help it get there.
It knows:
- How much profit it is making
- What its profit margins look like
- How much cash is available
- When cash is expected to come in and go out
- What tax liabilities are approaching
- What financial commitments are coming up
- Whether its current growth is sustainable
- What the next few months could look like financially
You don’t need to be an accountant to understand these things.
You simply need enough visibility over your numbers to make better decisions.
When you understand your finances, you can make decisions with confidence.
Can you afford to hire another member of staff?
And Can you increase your marketing budget?
Also, Can you invest in new equipment?
Can you take more money out of the business?
Can you comfortably manage the next tax bill?
Your numbers should help you answer these questions.
Don’t Run Your Business With Your Eyes Closed
Imagine getting into your car without knowing where you’re going, how much fuel you have or what’s happening on the road ahead.
You might still reach your destination, but you’re taking an unnecessary risk.
Running a business without understanding your financial position is similar.
You can have plenty of sales and a growing customer base, but if you don’t know your profit, cash position or upcoming commitments, you’re making important decisions without the full picture.
You’re effectively driving your business with your eyes closed.
And the bigger your business becomes, the more important financial visibility becomes.
Growth often brings bigger expenses, more staff, larger commitments and bigger tax bills. Without proper planning, growth can actually put pressure on your cash flow.
Understand the Business You’ve Already Built
Before you focus entirely on growing your business, take some time to understand the business you already have.
Ask yourself:
Is it profitable?
Are your margins healthy?
How much cash do you actually have available?
Do you know what your tax position looks like?
And Do you know what your cash flow could look like six months from now?
Do you know what financial challenges could be around the corner?
These questions give you a much clearer picture than revenue alone.
Because a bigger business isn’t necessarily a healthier business.
The goal should be to build a business that is profitable, financially stable and prepared for what’s ahead.
Check Your Financial Health
This is why we’ve created our Financial Health Scorecard.
It gives you an opportunity to step back from the day-to-day running of your business and look at the financial health of the business you’ve built.
Instead of simply celebrating another record month, you can start looking at the numbers that tell you what is really happening behind the scenes.
Because before you grow your business, you need to understand the one you’ve already built.
Revenue is exciting.
But profit matters.
Cash flow matters.
And knowing what’s coming next matters too.
Take the Financial Health Scorecard and find out how financially healthy your business really is.
LINK HERE: https://go.future-cloud.co.uk/business-financial-health-check
Get in touch with our team today to find out how we can support you!
info@future-cloud.co.uk
Your friendly, forward-thinking accountants!
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