As a business owner, you’re probably checking your bank balance regularly.
But here’s a question:
Does your bank balance actually tell you how healthy your business is?
Not really.
Your bank account only shows where you are today. It doesn’t tell you whether your profits are growing, whether your cash flow is sustainable, or whether you’re on track to achieve your goals.
A business health check gives you a clearer picture of your business performance before small issues become expensive problems.
The good news is that if you use cloud accounting software such as QuickBooks, Xero or FreeAgent, most of the information you need is already available at the click of a button.
Here are five questions every business owner should be able to answer.
1. Are your sales growing or declining?
Sales are often the first indicator that something is changing in your business.
Rather than looking at this month’s sales in isolation, compare them with:
- the same month last year
- the previous quarter
- your budget or forecast
Ask yourself:
- Are sales increasing?
- Have certain products or services slowed down?
- Are new customers replacing those you’ve lost?
Spotting a downward trend early gives you time to take action before it affects your profitability.
2. Which products or services make you the most profit?
Turnover is important, but profit pays the bills.
Many businesses focus on increasing sales without knowing which jobs, products or services actually generate the highest returns.
A simple profitability review can reveal:
- your highest-margin services
- products that take lots of time but generate little profit
- customers that are less profitable than they appear
Sometimes doing less of the wrong work is more valuable than finding more work.
3. Can you afford your next VAT and tax bill?
One of the biggest causes of financial pressure isn’t a lack of sales—it’s failing to plan for upcoming tax payments.
Ask yourself:
- How much VAT have you collected?
- How much Corporation Tax are you likely to owe?
- Have you set money aside?
Remember, the VAT you collect from customers isn’t your money. It belongs to HMRC and should be treated accordingly.
Planning ahead means tax bills become expected business expenses rather than unpleasant surprises.
4. Which customers still owe you money?
You may have completed the work and issued the invoice, but until the money reaches your bank account, you haven’t been paid.
Late payments can have a significant impact on cash flow.
Review your outstanding invoices regularly.
Consider:
- Which invoices are overdue?
- Which customers regularly pay late?
- Do you need to review your payment terms or credit control process?
Improving how quickly customers pay is often one of the easiest ways to improve cash flow.
5. Are you still on track to achieve your goals?
Every business starts the year with ambitions.
Perhaps you wanted to:
- increase turnover
- improve profitability
- recruit new staff
- invest in equipment
- reduce debt
- take more time away from the business
Halfway through the year is the perfect opportunity to review your progress.
If you’re ahead of target, fantastic.
If you’re behind, there’s still plenty of time to adjust your plans before the year ends.
Businesses that review their performance regularly are generally better placed to make informed decisions than those that only look at their numbers once a year.
Your accounting software is more powerful than you might think
Many business owners only use their accounting software to raise invoices and submit VAT returns.
In reality, software such as QuickBooks, Xero and FreeAgent provides valuable reports that can help you understand:
- sales trends
- profitability
- cash flow
- outstanding customer balances
- business performance over time
Used properly, these reports can help you make better business decisions throughout the year, not just at year end.
Final thoughts
If you can’t confidently answer these five questions, you’re not alone.
Many business owners are busy running their business and simply don’t have the time to analyse the numbers.
That’s where regular management reporting and business advice can make all the difference.
At RMC Accountants, we believe accounting is about more than preparing accounts and submitting tax returns. It’s about helping business owners understand their numbers, identify opportunities, and make informed decisions that support sustainable growth.
If you’d like an independent business health check or want help understanding what your numbers are telling you, our team is here to help.
Don’t wait until year end to understand your business performance. Contact RMC Accountants today for a business health check and make confident, data-driven decisions.