Profit and Loss Health Check

How can you tell if a business was healthy or not and what are the easiest ways to find out?.

CAD Partners can perform a Profit and Loss "Health-Check" to assist in this regard however some simple yardstick measure can help identify the main financial health issues. For example below is a simple step-by-step process where you simply take a recent profit & loss statement, look at the following line items and ask the questions below.
Here's a few points I would recommend checking.

• Income/Pricing: How is your price calculated? Does it take costs into account? Do you regularly increase prices or do you constantly absorb increased costs?

• Income Breakdown: Do you split income by product type/service type/region or division. It pays to know which are your most and least profitable areas.

• Break-even: Do you know how much you have to sell to cover costs and overheads? This is a great tool to measure all year and work towards a profit.

• Optimum Sales Volume: Many people say 'Maximum' is the same as 'Optimum'. This is often not the case, especially where cash-flow is concerned.

• Cost of Goods: Do you know how much more you have to sell to cover extra costs e.g. a new employee or income producing equipment?

• Stock: How do you manage it? Do you know which lines are moving quickest? Do you manage and dispose of obsolete stock - is it sucking up cash sitting on the shop floor.

• Purchases: Do you monitor purchasing and seek better terms from suppliers?

• Gross Profit: Do you know what your Industry Benchmark is and do you measure your business this way?

• Overheads: Do you regularly check the necessity of all items purchased? Thousands can be saved in unnecessary spending.

If you would like to discuss any of the above then contact CAD Partners (www.cadpartners.co.nz) for a 'No Obligation' chat.