As an employer, it is important to understand the key concepts that go into determining the financial health of your business. After the determination process, you can then effectively make the necessary adjustments (if needed) to improve the financial trajectory that your business is currently heading towards.
Being aware of the financial state not only benefits yourself but your employees as well. It affects all aspects of your business, so it is critical to keep a keen eye on the numbers. As an employer, it is your responsibility to provide the required resources to instill success throughout your teams. Having poor financial health will only prove to be a hindrance to the goal of company-wide success.
Four key factors go into determining the financial health of your business; profitability, efficiency in operations, liquidity, and solvency all play critical roles. Continue reading below to learn more about those categories.
Are You Profitable?
Arguably the most important aspect that goes into a company’s financial health is calculating if it’s profitable. Without profits, all the important work that is being done is wasted if the company isn’t growing. According to the Bureau of Labor Statistics (BLS), nearly 20% of new businesses fail within the first two years. Not seeing profit can be the critical factor that goes into whether your business survives.
If your business is at a loss instead of a profit gain, it is imperative that you reassess how and why profitability is not in the green. Some common practices to increase profitability include:
- Reduce Costs
- Price Higher
- Targeted Marketing
- Develop New Strategies
- Evaluate Productivity
Efficiency Throughout Operations
Are the resources being provided throughout your operations being used efficiently? For example, spending way too much time on developing check stubs instead of utilizing an online paystub generator is an area that can be easily improved upon. Instead of wasting time and money on tedious tasks, find online tools to help streamline the processes.
Liquidity & Solvency
While both terms deal with a company’s financial strength, they are both different yet equally important. Liquidity deals with more of a short-term metric that involves calculating how much cash a business has (including assets). Essentially, how much cash the company has so that issues like debts or large purchases can be managed quickly.
Comparatively, solvency deals with similar issues but in a long-term form. It is a company’s ability to manage financial commitments that will require ongoing forms of compensation. If a company has high liquidity but low solvency, that should be an indicator of poor financial health. Essentially, if the business gets into large amounts of debt with low solvency, it runs the risk of not being able to pay it down in the long term.
Financial Health Can Be Improved
With all the various applications and online services in the business world today, you can easily improve your financial health by utilizing them! Services like Check Stub Maker’s easy-to-use online paystub generator makes it simple to generate check stubs. You can have a paystub in your hand in as quickly as a minute.
See why businesses have used our service to print thousands of paystubs!