Who Can Do a Business Financial Assessment for Our Company?

When a company is undergoing a significant shift, like a big cultural change or a change of ownership, a financial assessment can give them a comprehensive picture of where they are financially to aid in their strategic planning. A business financial assessment helps with decision-making related to everything from short-term cash flow management to long-term vision-setting.
​
Over the last year and a half many companies have brought in consulting accountants and fractional CFOs to assess their current financial position. Let’s take a closer look at what a financial assessment includes and who is best poised to conduct one.

---

Analyzing Financial Health
As the name would imply, a financial assessment, first and foremost, analyze a business’s financials.

Financial statements like the company’s balance sheet, P&L statement, and cash flow statement should be examined by an experienced professional to look for problems and identify areas where the business can improve its financial position. These financials can then be used to generate important profitability, liquidity, and debt ratios that help to put the business’s performance into perspective relative to the industry.

Common ratios to track include, but are not limited to:

• Net profit margin
• Gross profit margin
• Coverage ratio
• Current ratio
• Quick ratio
• Debt-to-equity ratio
• Debt-to-asset ratio
• Inventory to net working capital
• Inventory turnover
• Total asset turnover
• Average collection period
• Return on assets
• Return on equity

​Of course, if the company has not been regularly generating financial statements or ongoing errors have compromised their accuracy, the first thing a professional will do is prepare them. Afterwards, the financial analysis component of their role can be fully realized.

An accountant will analyze the financials to look for things like:

• Whether the books are being kept in accordance with internal controls measures
• Where AR (accounts receivables) delays are causing cash flow issues
• Bank and credit reconciliation discrepancies
• Gaps in payroll filings that need to be fixed
• Where the company’s tax burden can be reduced

A CFO, on the other hand, will oversee FP&A (financial planning and analysis) activities, such as:

• Forecasting
• Strategic planning
• Improving data accuracy and ensuring data integrity
• Risk mitigation

This kind of financial assessment can be done as a one-time “check-up” or regular activity, depending on what you are looking to accomplish. A one-time assessment can be used to facilitate a business sale or accompany a funding request like when applying for a bank loan or approaching a potential investor. When assessments are done routinely, trends can be identified to inform ongoing operations decisions as part of overall strategic planning.

Note: keep in mind, a financial assessment is very different from a business valuation. An assessment gives an indication of how a company is doing financially and whether it is on track to hit its goals, whereas a valuation will attempt to determine how much a business is worth based on its fair market value. The latter is a much more formal evaluation and requires the expertise of a valuation expert.

Software & Technology
A financial assessment may include a non-numerical component as well, examining areas like software platforms, app integration, workflow automations, communication tools, and other technology. Looking at these areas can help to identify places where your team can be more accurate and efficient, both of which can result in significant business wins.

Understanding where to use automation is one area where a career financial professional can add considerable value by:

• Eliminating tedious tasks
• Streamlining bookkeeping activities
• Managing payroll and benefits
• Meeting important filing and reporting deadlines
• Detecting and preventing fraud

As a result, automation can free up personnel to do more sophisticated value-add activities, reduce burnout, improve job satisfaction, improve communication, de-silo teams across the organization, and drive revenue growth.

People & Processes
When a financial assessment is being done by a senior manager or executive, it may also offer the perspective of how staff can be better utilized to improve financial outcomes. In much the same way that utilizing the right tools or technology can improve business output, having the right people and processes in place is critical to moving the organization towards its long-term goals.

Understanding which roles are critical and what current staff is capable of can help to identify staffing gaps that need to be filled to kickstart or maintain revenue growth. An experienced financial professional can identify areas where additional staff should be hired and where existing staff should be reequipped to better serve the company.

Who Does Financial Assessments?
Knowing what you want to get out of the process will help determine who you should hire to do a financial assessment.

If you are looking for a financial assessment in the strictest sense of the word, a consulting accountant will have the experience-level and skillset needed to do the job. However, if you are looking for a broader analysis of everything adjacent to the company’s finances, an executive level role will be a better fit. A CFO will have the business acumen needed to oversee and analyze accounting and finance as well as everything affected by these areas.

Depending on how intensive your needs are, you may hire an accountant, financial analysts, controller, or CFO to conduct a financial assessment for your business. When it comes to FP&A, a financial analyst or hybrid accountant is typically brought in to do the work “in the trenches” while a CFO will oversee not only these efforts but also all other accounting and finance activities.

Now, that is not to say that in either case, you need to carve out a full-time, in-house position. A project-based role or a part-time outsourced role may fit the bill if you need help with a limited engagement or on a less-than-full-time basis.
​
Find out how our expert senior managing accountants can help your business. We can provide a one-time financial assessment or ongoing an analysis of your business financials to improve cash flow, budgeting, internal controls, tax preparation, or reporting.