Small business owners like you must keep a close eye on business viability. Most people think about business viability only in the initial stages of setting up a business. For example, determining if the business idea is viable or not.
However, business viability must be checked upon throughout the life cycle of your business. Whether your business is flourishing, barely surviving, or hasn’t yet taken off, business viability is critical in all stages and conditions of your business.
Business Viability: What does it mean?
In simpler terms, business viability means your business can overcome critical challenges and sustain over a period of time while achieving growth whether slow or rapid. There are two situations in which a business is considered viable.
- When your business is making the required profit from day-to-day operations. Moreover, your business can meet the obligations of business creditors.
- And if your business has enough funds to continue business operations even when you are not making any significant profits.
A business coach Australia suggests maintaining your accounts and financial records along with keeping a close eye at the cash flow management. Moreover, you should update your business plan according to the current financial environment to keep your business viable.
Business Viability Assessment Tool
Australian Taxation Office (ATO) offers a business viability assessment tool. This tool will help you assess business viability by entering critical financial information. Let’s take a deeper look at it below.
The assessment tool considers the following parameters:
- Cash Flow
- Gross Margins
- Assets and Liability
- Creditor and Debtor position
- Available funds
The tool assesses these factors to provide a financial report. The report will give you a closer insight into whether you can continue meeting the current business commitments and whether you will be able to pay your debts.
Since you will be sharing your financial records with ATO, you might be worried about data privacy. Let us tell you ATO doesn’t store or have direct access to your financial information entered in the tool.
Make sure you enter at least three years of financial information to analyze financial trends for your business and identify weaknesses.
Financial Report Analysis
Business viability assessment tool provides you with a financial report which you must analyze to determine if your business is viable or not.
- If your financial report consists of a high number of green ticks, your business is viable and growing.
- If your financial report consists of a high number of red ticks, your business is likely not viable. It also means you need to take a deeper look at your finances and determine what is working and what isn’t along with what needs to be changed.
A business coach Melbourne identifies the following warning signs of low business viability.
- More liabilities as compared to your assets.
- Drop in sales over the past three years.
- Payments are overdue to suppliers.
- Invoices outstanding for more than 90 days.
- Lack of good record keeping and updating of the business plan.
Handle Negative Financial Reports with Professional Help
Knowing that your business isn’t viable can be worrisome. It can reduce your motivation to work toward bettering the situation. However, you can handle negative financial reports with professional help.
You can either get in touch with a professional bookkeeper or accountant. Or you can get in touch with one of our business advisors at Keystone Executive Coaching. We offer business coaching Sydney and work closely with small business owners to increase business viability.
We create an action plan to consider critical business expenses and help you avoid any costly expenses. We will also provide you with critical advice on business functions such as marketing, finances, sales, human resources, and more.
Get in touch with us now to know more.