A clear view of profit, cash flow and long-term value
Running a successful business isn’t just about surviving month to month — it’s about knowing where the business is heading and whether it’s financially strong enough to get there.
A financial health check gives you that clarity.
At its core, it’s a structured review of your business that brings together financial and non-financial information to assess three critical areas:
- Profit – is the business making money in a sustainable way?
- Cash – can it fund itself and meet its obligations?
- Enterprise value – is it actually building long-term worth?
Think of it as a business performance report, not just an accounting exercise.
Why a financial health check matters
A well-prepared financial health check helps business owners move beyond “keeping the lights on” and start making confident, informed decisions.
Done properly, it allows you to:
- Understand what truly drives performance — not just the numbers on the surface
- Identify early changes in profitability, cash flow and value
- Be bank-ready and investor-ready at all times
- Manage lender or investor expectations and comply with funding covenants
- Reduce the risk of surprises from financiers (which is one of the biggest threats to business stability)
- Create a solid foundation for growth planning and strategy
- Measure progress against goals, benchmarks and minimum survival thresholds
Businesses aren’t just about numbers — they’re about people.
But it’s the numbers that determine whether the business thrives or struggles.
A financial health check is essential for any business looking to grow beyond survival.
What makes a good financial health check?
A quality financial health check is built on four simple principles:
- Linking actions to outcomes
It connects what you do in the business (pricing, staffing, efficiency, customer behaviour) with what you get (profit, cash flow and value).
- Using more than just financial numbers
Financial results only tell part of the story. Non-financial drivers — such as productivity, customer retention and delivery performance — explain why those results occur.
- Looking at profit, cash and value together
Profit doesn’t guarantee cash. Cash doesn’t guarantee value.
A financial health check examines how all three interact, rather than viewing them in isolation.
- Supporting better long-term decisions
The goal isn’t reporting — it’s insight.
The output should support smarter investment, funding and growth decisions over time.
What information do you need?
At a minimum, a financial health check typically uses:
- Two years of detailed annual financial statements
- Monthly management reports from your accounting software (e.g. Xero, MYOB or QuickBooks)
- A current budget or forecast
- Relevant non-financial data, limited to a small number of meaningful drivers (no more than two per category)
The emphasis is on quality and relevance, not volume.
Key financial areas reviewed
Profitability
These measures show how much of your revenue actually turns into profit.
Common examples include:
- Gross profit margin
- EBITDA margin
- Net profit after tax (NPAT)
- Net operating profit after tax (NOPAT)
- Break-even revenue level
Cash flow and funding
Cash flow keeps the business alive — and keeps banks comfortable.
Typical measures include:
- Operating cash flow
- Net and free cash flow
- Funding capacity and covenant compliance
- Debt-to-equity ratio
Liquidity and working capital
This focuses on how efficiently cash moves through the business — from suppliers, to inventory, to customers, and back again.
Key indicators include:
- Current ratio
- Accounts receivable days
- Inventory days
- Accounts payable days
Return on investment
These metrics show how effectively the business converts invested capital into profit and value.
Examples include:
- Return on equity
- Return on invested capital
- Performance relative to the cost of capital
- Economic value added (EVA)
These measures are particularly useful for benchmarking and strategic planning.
The role of non-financial data
Financial results are outcomes.
Non-financial metrics explain why those outcomes occur.
Common examples include:
Operational performance
- Production or service efficiency
- Re-work and error rates
- Inventory turnover
- On-time delivery
Customer outcomes
- Customer satisfaction and feedback
- Retention and repeat business
- Net Promoter Score (NPS)
- Delivery in full and on time (DIFOT)
People and workforce
- Employee engagement and satisfaction
- Staff turnover
- Training and capability development
- Workplace health and safety
When aligned correctly, these measures provide powerful insight into future performance.
Ensuring the data is reliable
A financial health check is only as good as the data behind it.
This means:
- Accounting records must be up to date and consistent
- Income and expenses must be correctly matched
- Balance sheet items need to be properly classified and supported
- The accounting system should be reliable and well-maintained
If the data isn’t sound, the conclusions won’t be either.
Why data normalisation matters
Some numbers distort the true picture of business performance.
Before analysis, it’s important to adjust for:
- Abnormal items — errors, anomalies or unusual transactions
- Non-recurring items — one-off events that don’t reflect ongoing operations
Normalising data allows you to see sustainable performance, which is what really matters for decision-making.
Turning insight into action
Once the financial health check is complete, the real value lies in interpretation.
Below are examples of how common metrics translate into practical strategies:
Metric | What it tells you | Typical improvement strategies |
Revenue | Total income generated | Improve pricing, increase volume, add revenue streams |
Profitability | What’s left after costs | Lift margins, reduce costs, improve efficiency |
Asset turnover | How well assets generate sales | Use assets better, improve cash management |
Cash conversion cycle | Speed of cash movement | Collect faster, hold less stock, bill sooner |
Free cash flow | Cash left after operations | Improve margins, manage expenses, speed up billing |
Break-even point | Minimum sales needed | Adjust pricing, reduce fixed costs |
Net debt & interest cover | Debt sustainability | Realistic repayment planning and lender engagement |
The bottom line
A financial health check gives you confidence, clarity and control.
It helps you understand where your business stands today — and what needs to change to support tomorrow’s growth.
If you’d like help preparing or interpreting a financial health check tailored to your business, we’re here to help you own your numbers and own your future.
