Running a business without checking its financial health is like driving blindfolded. You might be moving fast, but you have no idea where you’re headed or whether you’re about to crash.
A financial health check helps you understand if your business is actually profitable, sustainable, and ready to grow.
In this article, you’ll learn how to assess your company’s financial well-being, what numbers to watch, and how platforms like Zaccheus make this process easy for entrepreneurs in Nigeria and beyond.
What Is a Financial Health Check?
A financial health check is a regular review of your company’s finances to measure how well it’s performing.
It’s like a medical check-up but for your business. It helps you identify early warning signs of trouble, such as poor cash flow, rising debt, or falling profits.
Key Indicators of Business Financial Health
To know if your business is doing well, you need to track a few important metrics.
Here are the main indicators:
1. Cash Flow
Cash flow is the lifeblood of any business. Positive cash flow means more money is coming in than going out.
Tip: If you often struggle to pay bills or salaries, your cash flow might be negative — even if sales look good on paper.
2. Profitability
Check your gross and net profit margins.
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Gross Profit Margin = (Revenue – Cost of Goods Sold) ÷ Revenue
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Net Profit Margin = (Net Income ÷ Revenue) × 100
Healthy Nigerian SMEs often aim for at least 20–30% net profit margin.
3. Liquidity Ratio
This measures how easily you can pay short-term debts.
The ideal current ratio is around 2:1 meaning you have ₦2 in assets for every ₦1 in liabilities.
4. Debt-to-Equity Ratio
Shows how much of your business is financed by debt versus your own investment.
If this ratio is high, your business may be too dependent on loans.
5. Revenue Growth Rate
Track whether your sales are increasing monthly or quarterly. Consistent growth shows a healthy business trajectory.
How to Perform a Financial Health Check for Your Business
You don’t need to be a finance expert to check your company’s health. Follow these steps:
Step 1: Gather Financial Statements
Collect your income statement, balance sheet, and cash flow statement for the last 6–12 months.
Step 2: Analyze Your Cash Flow
Review how money moves through your business. Are you collecting payments on time? Are expenses growing faster than revenue?
Step 3: Compare Revenue vs Expenses
If your expenses keep growing faster than your sales, that’s a red flag. Use Zaccheus to automatically track and visualize this data in real time.
Step 4: Evaluate Profit Margins
Use simple tools or spreadsheets to calculate profit margins. If margins are shrinking, look for inefficiencies or pricing issues.
Step 5: Review Debts and Liabilities
Too much debt can choke your cash flow. Make a plan to reduce loans and renegotiate terms where possible.
Step 6: Track Key Ratios
Zaccheus automatically calculates important ratios like current ratio, debt ratio, and operating margin saving you from complex math.
Common Signs Your Business Might Be Struggling Financially
Recognizing early red flags can save your company from major losses. Watch out for:
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Frequent cash shortages or borrowing to cover daily expenses
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Declining profit margins despite stable sales
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Rising unpaid invoices or delayed customer payments
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Late salary or supplier payments
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Overreliance on short-term loans
If any of these sound familiar, it’s time for a financial reset and a proper health check.
How Zaccheus Helps You Stay Financially Healthy
Zaccheus is your AI-powered CFO, designed to make financial management simple for entrepreneurs and SMEs.
Here’s how it helps:
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Automated Financial Tracking
Zaccheus connects to your bank and accounting data to track your income, expenses, and cash flow automatically. -
Real-Time Financial Health Dashboard
Get a visual snapshot of your business’s health at any time, no spreadsheets or manual calculations needed. -
Smart Insights & Recommendations
Zaccheus doesn’t just show numbers. It interprets them and gives you insights like:
“Your cash flow will turn negative in 14 days if expenses continue at this rate.”
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Profitability Reports in Naira
Track profits, margins, and performance in real-time with accurate ₦ calculations tailored for Nigerian markets. -
Alerts & Forecasts
Get alerts when your business is at risk and forecasts that help you make better data-driven decisions.
Example:
A small fashion brand in Lagos used Zaccheus to monitor cash flow and discovered it was overspending ₦200,000 monthly on suppliers. Within 2 months, they were back to positive cash flow.
Conclusion: Keep Your Business Financially Fit with Zaccheus
A financial health check isn’t just about crunching numbers, it’s about understanding the story your finances are telling.
By tracking key metrics like cash flow, profit, and debt levels, you can make better decisions that drive growth.
With Zaccheus, you don’t have to do it alone. You get AI-powered insights that make monitoring, forecasting, and improving your business’s financial health effortless.
Ready to check your financial health?
Visit usezaccheus.com and discover how smarter data leads to stronger businesses.
FAQs
1. How often should I perform a financial health check?
At least once every quarter. Regular reviews help you stay on top of cash flow, expenses, and profitability before small problems grow.
2. What is the most important indicator of financial health?
Cash flow. If your business consistently has positive cash flow, you can handle bills, reinvest in growth, and stay stable during slow months.
3. Can Zaccheus replace an accountant?
Not entirely, but it works as your AI CFO, giving you real-time financial clarity so your accountant spends less time on manual tracking and more on strategy.
4. What if my business isn’t profitable yet?
That’s okay. Use financial health checks to identify where money leaks are happening and use Zaccheus to optimize your spending and forecast growth.
5. How can I improve my financial health fast?
Cut unnecessary costs, track spending closely, and focus on increasing cash inflows. Zaccheus helps automate this with data-driven insights.