How to conduct a business health check



It is said your health is the most important asset you have. That’s why doctors advise us to conduct regular health checks on our bodies, ensuring we’re continuing to run at optimum efficiency and that our internal systems are all working properly.

Regular health checks pick up early signs of issues before they become full-blown health problems that could endanger our lives.

In the same way, a business health check can provide you with early warning of potential issues, especially to do with solvency. So how do you conduct a business health check? We’ve created this great checklist for you to use:

Business health checklist

Answer these questions truthfully with Yes/No. At the end of the list, add up your answers and see where you come out. 

  1. Are you paying creditors in partial payments, instead of the full lump sum?
  2. Do you have a high staff turnover?
  3. Are you debtors out of control?
  4. Are your financial records and data management out-of-date?
  5. Do you have underutilised or under-performing assets on the books?
  6. Are your purchasing patterns irregular?
  7. Are you often swapping out suppliers?
  8. Are your company assets showing signs of age or obsoletion?
  9. Do you have slow-moving stock?
  10. Are you behind on GST and PAYE?
  11. Are your customers deserting you for other competitors?
  12. Are you paying high interest costs on your loans?
  13. Do you have creditors pressuring you for payment?
  14. Are you facing a formal or statutory demand?
  15. Have you made inaccurate costings?
  16. Are relationships between the director and shareholders strained?
  17. If you lost your major customer, would you be vulnerable?
  18. Are you concerned about your ability to trade on?

If you answer yes to either of these questions below, you are technically insolvent under Section 4 of the Companies Act 1993.

  1. Are you struggling to pay creditors when due?
  2. Are your business liabilities greater than your assets?

How did your business fare?

Count up the amount of times you answered Yes to the above questions. That number will tell you how your company performed in the business health check.

The results:

Less than 5: A healthy business

Congratulations, your business is fit as a fiddle. While there are always areas you can improve, it looks as though things are running smoothly and you’re in no risk of insolvency.

Between 6-12: Early warning signs

While you’re still trading and things don’t seem that bad, you’re not as healthy as you’d like to believe. Don’t ignore these early signs, as they can lead to bigger problems later on. Call McDonald Vague to talk about a treatment plan to get your business back on its feet.

More than 12 or yes to questions 19 or 20: Your business could be in trouble

Your business could be insolvent or at risk of becoming insolvent. To understand where your business is at, you should talk to a qualified professional who will help understand what your next steps should be. Contact us now to find out more.

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