Time For A Financial Healthcheck?

Jonathan Smith, ACMA was a senior Finance executive in some of the largest financial institutions in the UK. For the past 10 years he has helped startup and scaleup businesses to grow their finances with confidence.

Driving business growth is hard. (I know – I’m in the business growth business too!)

So it’s often the case that business leaders leave the Finance function to work itself out while they focus on the hard graft of growing the business. And that always leads to all sorts of difficulties. Supplier payments get missed and deliveries stop, your debtors use you like a free overdraft facility, the management accounts are late again… and how much money do we really have in the bank?

Sometimes it needs a real crisis to start the sorting-out process. Perhaps you’ve hit an unexpected cash crunch and have to borrow quickly at high rates just to make payroll. Perhaps your auditor is raising questions about the accounts that you can’t answer. Filing date is looming, and the there are whispers about ‘qualified accounts’. The last thing you want in the public domain!

Does it have to be this way?

Of course not.

As they say, the best time to start has already gone, but the next best time is now. So take a methodical approach to assessing your Finance capability, identify the top issues that are ‘on fire’ – and then address them one by one.

I have carried out financial healthchecks on many different kinds of businesses to see where the ‘heat’ is in the Finance function.

  • What’s working well?
  • What’s getting stressed?
  • What needs urgent attention? NOW.

The graphic below shows how I organise the thinking and assessment work.

The Aiteo CFO – Organising the Finance function

So how do I do it?

Here are three examples of the questions I ask when I do a financial healthcheck.

1. Show me the latest bank reconciliation

I ask to see last month’s bank reconciliation. (Is there one…? That’s always a major tell.) Does it reconcile to the bank statement? Has it been reviewed to ensure that no-one’s misreporting the cash? How old are any reconciling items and when will they be cleared?

This is a simple accounting controls check. Things to consider: was the reconciliation ready, or did someone have to, err, find it in the files (=prepare it quickly)? Were the explanations credible? Does it feel under control?


2. Let’s have a look at the 13-week cashflow forecast.

All businesses should have a short-term cashflow forecast. Ask for it – and see what happens. Is there one? When was it last done? Yesterday? Last year? (Not very useful for a 13-week forecast…)

Once the team have produced it, can they explain the risks to the forecast? What if… debtors don’t pay? Can we make payroll this month? Are we increasingly doing sales on credit rather than cash? What’s the impact? Are suppliers threatening to with-hold key supplies if you don’t improve terms? And so on. 

Then look at what corrective actions the Finance team has suggested. Can we improve our overdraft cost? Can we delay payments to some suppliers? Is there an opportunity to run at a lower stock level to release cash? Can we improve our DSO? (Look it up.) 

Does this give a sense of a Finance team that is actively looking forward on your behalf and is on top of the early warnings?


3. How will you convince the auditors the business is a going concern?

Your statutory accounts are the public window into your company, and you customers, your suppliers and your lenders WILL look at them. And the last thing you want is your auditor to prepare a statement that your business is, in their view, NOT a going concern.

So ask the Finance team what steps will they take to prove this to the external auditor? This is a key reporting test for your statutory accounts. Do you get the sense that your team is actively planning and anticipating the process to ensure the audit succeeds and has an eye on your external stakeholders?


Naturally this is just one question each out of three of the six main areas of my healthcheck.

But you can learn a lot about your business by just asking your team (or yourself) these three questions. Try it, and see what you learn.

Meanwhile, if you’re interested in finding out more about how a financial healthcheck will help your business get ready for growth, please get in touch and arrange a video call using the scheduler below. ?

I look forward to continuing the conversation!

Let's talk about a financial healthcheck for your business ?