Suppose you’re expanding your company and hoping your business thrives in the long run. In that case, you must prioritize frequent financial analysis, allowing you to review your books each month and taking appropriate measures for growth.

Most businesses do not review their finances regularly nor do they have risk assessments in place to counteract any emerging problems affecting the company’s financial health.

Let’s explore how to conduct a financial analysis for your company.


What Is a Financial Analysis?

Financial analysis is a process of review involving various business functions relating to performance and goals, allowing companies to constantly gauge their trajectory and make minor adjustments as needed.

This means that you can compare the actions you are taking on a daily basis with the numbers you are receiving, creating a contrast that allows you to understand which actions are leading to an improvement and which ones are not ideal.

By identifying the problems your company is facing through financial analysis, you can improve its financial health by coming up with the right strategies that lead to growth.


How to Conduct a Financial Analysis for Your Company?

1. Compare Predictions with Monthly Returns

If your business predicts it will earn an extra 10,000 USD per month due to the new company software, you should keep a close eye on the returns over the next three months.

This indicates whether your current strategy is yielding the predicted rewards, allowing you to double down on the right actions and explore other routes if it isn’t working.


2. Identify Errors

Successful financial analysis involves knowing when your performance is on track or deviating from the desired trajectory, allowing you to assess your goals and actions more thoroughly.

Most times, you will either be close to your expected trajectory or performing worse than the prediction, providing insights into company strategies.


3. Review Company Income Statements

Reviewing your company’s income statements provides insight into how much income is being generated and how much the business is losing in expenses.

This means you can review your sales and minimize any unnecessary expenses by keeping things in line with your budget.


4. Review Cash Flow Statements

Cash flow statements provide insight into all the money moving in and out of your business, allowing you to compare it to your forecast to know whether you’re moving in the right direction or if something needs to change.

This is an essential part of a financial analysis that allows owners to measure their company solvency and work out the ratios needed for optimal sustainability and development.


5. Analyze the Balance Sheets

Analyzing your balance sheet allows you to know your debit-to-credit ratio and lets you consider the rate at which you’re earning money compared with the rate of debt accumulation.

Reviewing these numbers also works as risk assessment, which is a necessary part of financial analysis.


Summing Up

Financial analysis helps a company stay afloat because it provides an opportunity to constantly track and monitor progress, which is the ideal strategy for long-term business development.

However, not all companies follow through on this basic strategy, which works against them in the long run and prevents them from identifying and mitigating risks and hazards along the way.

EBOS Cloud Accountants offers various business opportunities for companies looking to take their operations to the next level, providing financial analysis as part of their services. If you would like to get a financial analysis of your business done by professionals, you can email to ask@ebos-sg.com now and we’ll get in touch!



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