Detailed Financial Analysis

Imagine this scenario….
You are the owner or manager of a small to medium sized business. Business appears to be ok but there are a few issues: profits are slender and cash is tight. You have an opportunity to expand revenues however it will need a sizable investment in plant and equipment. You think it may be your way to a brighter business future but you don’t know for sure. It’s a substantial financial risk.


So what would you do?



This was a dilemma of one of our clients. In fact when we first began working with that business they were about to jump on a plane overseas to buy equipment. Now, understand that these were experienced business people. They had done a great deal of due diligence on the equipment suppliers, their own customers and the overall market. Their business judgement was that it would be a good decision. We suggested that they postpone their trip for a day or so whilst we performed a detailed financial review of their situation and ran some scenarios on the likely financial impact on their business.


Just as well we did.


That review showed that the decision to invest would not have been a wise one. Due to a variety of issues any extra revenue generated by the increased capacity would have been quickly consumed by the needs of the expanded business. Tied up in areas such as stock holdings and accounts receivable. And that key ratios such as ROCE (Return on Capital Employed) would have been reduced, not increased. In short there were a number of issues that required fixing before it made sense to make such a significant investment.

So… if you are the owner or manager of a small business who already has a good grasp on basic financial management you’ll have realised that your Profit & Loss and Balance Sheet, although essential reading, just don’t provide the depth of analysis that you may need to fully understand your business finances.


And that’s where the Business Clarity Detailed Financial Review comes in. For starters the Review provides the most thorough analysis of how your business has been performing financially to date with:

  • Detailed year to year comparisons
  • Wide ranging ratio analysis from basics such as Interest Cover through to Return on Capital Employed
  • Cash usage and wastage
  • Sustainable growth cycle

The layout of the of this information in a report allows ready identification of strategies and tactics to improve key ratios.


More importantly the Review allows you to try various scenarios to determine the likely impact of certain business decisions. Like our client above who was planning the big investment. Those scenarios provide that extra guidance to assist with forecasting and budgeting, succession planning, making investment decisions in facilities and equipment, determining priorities. And much more.


If you’d like to get a genuine understanding of your business’ financial situation and stop flying financially blind then call Business Clarity NOW for a discussion with one of our expert business advisers.

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