Analyse the financial health of your business
Reviewing the financial health of your business should be part of the process you undertake before reopening after a disaster. This involves preparing or reconstructing your year to date financial statements.
Financial statements allow you to undertake a detailed analysis to help you determine how you want your business to operate after you reopen and whether it is financially viable for you to reopen. Your accountant will be able to assist with the analysis.
Such analysis will also enable you to spot any trends in your business prior to the disaster and compare how your business performed against similar businesses in your industry (more on benchmarking below). Such information will be useful in identifying areas of the business that were operating well and those areas that should be improved or closed.
We have included a template of the ratios commonly used to assess the financial health of your business and how to calculate such ratios. We recommend that you compare your results to other businesses in your industry. Benchmark data is provided by several commercial providers. Basic benchmarking data for many Australian industries can be found on the Australian Taxation Office (ATO) website and searching “small business benchmarks”.
Financial health checklist (see page 11, PDF)
Analysing the financial health of your business through ratios (see pages 23 – 25, PDF)