Jul 10, 2019

The Importance of Business Wellness Checkups

John S. Stoner, CPA, CVABy John S. Stoner, CPA, CVA

Are you ever tempted to skip an annual physical because you are feeling fine or cancel the appointment because you are too busy? Despite this normal impulse, we all understand that annual physicals are essential to our long-term well-being. It is a chance for doctors to ask questions about health or lifestyle changes, check vital statistics, and detect underlying or nascent issues before they become full-blown problems.

Do Business Checkups Like a PhysicalJust like an annual physical, periodic business assessments also are essential to long-term success. Far too often, however, owners are so busy with day-to-day operations and immediate tasks that they fail to step back and take stock of the big picture. Important questions need to be considered, such as what is working for the business and what areas could be improved?

Owners or executives who want objective feedback on the financial health and sustainability of their business should conduct a routine wellness checkup. The fresh perspective from an outside expert will offer candid feedback that can be used to improve or sustain the health of your business.

The most effective business checkup program is one that is specifically designed for your organization’s individual circumstances. This tailored approach factors in size of business, length of time in business, types of products and services offered, and broader industry considerations. Generally speaking, the areas of focus typically include some or all of the following:

  • Review and understand the organization’s business model
  • Financial trend analysis of recent operations (three to five years)
  • Financial performance compared to industry benchmarks
  • Capacity to generate cash flow from ongoing business operations
  • Review of organizational design and staffing levels
  • Review of standard business processes and accounting information systems
  • Review of operational processes and equipment utilization
  • Identification of critical business relationships (customers, referral sources, and vendors)
  • Gross margin and profitability analysis by lines of business and/or customer
  • Business risk assessment

Once the above information is gathered and analyzed, the business adviser is equipped with some initial "test results" to offer a professional opinion on the overall health of the company and to provide a baseline for future checkups or report on any change in status since the previous diagnostic.

The feedback received from the business assessment will help address important questions, including the following:

  • Do our current business activities generate an adequate level of profits?
  • Has our financial performance been improving or declining in recent years?
  • How do we compare to our peer group?
  • Are we operating efficiently?
  • Do we have the infrastructure to support future revenue growth?
  • Have we assembled, trained, and retained an effective workforce?
  • Which business relationships are most important to us, and how do we protect them?
  • What are our most significant vulnerabilities, and how do we address them?
  • What additional financial resources do we need to execute our strategic plan?
  • Are we well positioned for future success?

Business owners who consider questions like these on a periodic basis will be better positioned to respond and adapt to emerging challenges or seize new opportunities for growth.

John S. Stoner, CPA, CVA, is a partner in the Business Consulting Services Group of RKL and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at jstoner@rklcpa.com.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.