Do you find accounting and finance a tedious job? Hire someone! That's really no shame, but make sure you always know how you're doing financially.

In this article, we are going to offer you guidance by highlighting 5 signs of a financially healthy company. This way, you will have an initial indication of whether you are in the right place within a few minutes.

1. ‍My company makes a profit

Profit is one of the most important figures when it comes to financial health. You can make a lot of sales, but without profit, things won't go well for long. Do you notice that you are not making a profit structurally? Then it may be that the revenue model is not profitable enough at that time.

A small nuance: companies that have just invested a lot or have just started can make losses for a period of time because they have high start-up investments or consciously incur high costs to stimulate further growth. This does not necessarily mean that your company is financially unhealthy. If your company has the prospect of profit, that is a positive sign.

Calculating your profit isn't difficult. Subtract the costs of the proceeds and what remains is your profit. In addition to profit, it is also good to look at the return. You can calculate the return on equity, debt and total assets. In this articleyou can read how to calculate profitability.

2. ‍The costs are in line with the turnover

What is the breakdown between turnover and costs? If your costs are lower than your turnover, that is of course a positive thing. But it is possible that your profit is very low or that your turnover increases, but your profit may not grow with it. These are signs to take a critical look at your costs.

Do you have a clear overview of all your costs? If not, creating an overview is the first step. When you have this and keep track of it, you always have a quick insight into what goes out. The next step is to take a good look at the costs. Which costs can be removed or reduced?

The lower your cost, the more you can get out of the turnover. This ensures that you create more financial space. That space gives you more peace of mind as an entrepreneur and it has a positive effect on your financial health.

3. ‍Cash flow is stable and positive

In addition to profit, cash flow is an important measurement tool for financial health. Do you have insight into whether you have a stable and positive cash flow? It is wise to keep an eye on this. Even if you want to apply for a business loan or credit. This is because the cash flow is analyzed during the application process.

Your cash flow is separate from the profit and loss account. This concerns the income and expenses that are visible in your bank account. Is there more income than expenditure? Then this is a plus for your financial health.

Are expenses more than income? Then this does not immediately mean that your financial health is at risk. It is important here that this is not structurally the case. When you make a big expense, chances are you'll have a negative cash flow for one month.

If your cash flow is structurally negative, this can cause long-term problems. Take a good look at where these expenses come from. With a cost overview, you often identify the monthly and recurring costs. For cash flow, it is important to identify all expenses. Unnoticed, there may be occasional expenses that jeopardize cash flow. By getting more insight into this, you can get your improving cash flow.

4. ‍You have more equity than debt

A healthy company has sufficient equity on the balance sheet. You need this capital to be able to invest quickly. For example, when an opportunity in the market presents itself.

Of course, it is possible that you need additional financial resources. Financing an investment is part of doing business and is almost inevitable as your business grows. The most important thing is that you are not or remain dependent on lenders.

You can call your company financially healthy if there is more equity than debt in the company. The key figure that we use for this is called solvency. It indicates whether you will be able to pay off debts in the long term. This is an important measurement tool for lenders.

Solvency is calculated by dividing your equity by total assets and multiplying it by 100. The resulting number is your solvency ratio. How high this ratio should be for financial health is not the same for every company. But if the ratio is higher than 25, you're actually always in the right place!

5. ‍You have a diversified customer portfolio

Spread your chances of winning! When you only have one customer, your company is financially vulnerable. If this customer drops out, for whatever reason, your income will also disappear.

Having one customer isn't necessarily a bad thing. But it's good to realize that you're financially dependent on this customer. Make sure you have a signed agreement where a notice period has been agreed. This gives you more time to find new work when the collaboration ends.

In addition, it is good to build a strong and high-quality network. When you need extra work or more customers, you can rely on your network. Do you want to expand your network or give it more attention? Then it's smart to focus on potential clients that look like your existing customer. You then have an advantage because you are already familiar with the industry or type of company.

And? Is your company financially healthy?

Of course, we can't just determine with certainty that your company is financially healthy. But when the above signals are green, you can assume that there is a good basis for a bright future.

It also does not mean that if there is less score on the above points, your company will immediately be in trouble. The most important message in this article is that you, as an entrepreneur, are well aware of your financial situation. This allows you to switch quickly, improving or keeping your financial health on track.

Boost your cash flow or are you going to invest?

Many entrepreneurs are financially healthy and yet also need financing. For example, because they have made a large investment or need to pre-finance a project. With financing, you ensure that you can absorb fluctuations in your cash flow.

Swishfund can help you with a suitable business financing. Do you want to know what is possible? Simply make your request online. We'll call you within 24 hours with an informal proposal.

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