Performing a financial health check for the new tax year

As businesses come to terms with higher operational costs, it’s crucial to perform a health check to assess company finances and monitor insolvency risk, as this will determine how well the business will fare over the coming months. A financial health check provides a once-over of the business, reviews performance indicators and scans the company for potential red flags.

Gillian Sayburn, partner at Begbies Traynor Group Newcastle, deep dives into the many benefits of performing a financial health check, including averting the collapse of your business if it is on the road to becoming insolvent.

What does a business health check entail? 

A business health check paints a comprehensive picture of financial health by conducting a detailed assessment of various areas, such as the company balance sheet, cash flow, and operational efficiency.

While a health check is mostly used to determine the financial position of a business, it also plays a supporting role in key decisions, such as your investment strategy, appetite for commercial borrowing and capacity to take on both short and long-term finance.  

We look at the fundamentals of a business health check:

Balance sheet and cash flow – These two factors function as a compass for a business as they signal whether the business is heading towards growth or decline. They are also used to test for insolvency, as if liabilities outweigh assets or cash flow falls short of covering bills, this raises a red flag indicating insolvency.

A health check assesses the rate of income vs expenditure and whether there’s a sufficient financial cushion to help the company absorb any unexpected price rises, as currently experienced by UK businesses. With higher Employers’ National Insurance Contributions, along with a rise in National Living Wage now in effect, companies must be able to bear a greater financial burden without disruption to the balance sheet or company cash flow.

Credit control – The credit control function of a company must be robust to protect the company against bad debt risk, for which the consequences can be devastating. Bad debt is money owed to a business that’s unlikely to be paid and, therefore, written off. Doing this provides clarity on the financial position of the business, particularly accounts receivable, which is the value of funds due from debtors.

Late payments are a common pain point for businesses, leading to cash flow problems and disruption to company growth.

According to the Intuit QuickBooks 2025 Small Business Late Payments Report, 62% of UK small businesses surveyed were owed money from unpaid invoices, with each owed £21.4K in unpaid invoices on average.  Businesses found that consistent late payments stunted growth due to the restrictions placed on company cash flow.

Creditor support can prove worthwhile for businesses stacked with unpaid invoices, with little to no results after attempting to collect debts.

Forecasting – By forecasting the financial performance of your business, you can gauge whether your company is financially able to continue operating or lacks financial fitness. Forecasting can range from producing reports on cash flow, sales, profit and loss, which will directly impact your budget.

Auditing for efficiency – When conducting a health check on your business, auditing for efficiency can help seek out inefficiencies. By finetuning or eliminating areas of your business that are underperforming or non-performing, you can build a lean business and cut out unnecessary costs.

While a health check can help solvent businesses solidify their position, it can prompt companies at risk of becoming insolvent to seek a lifeline before running the risk of trading while insolvent, for which the consequences are serious.

A turning point for businesses in the red

A financial health check is an essential yet underestimated tool for businesses as it provides a window into business performance. While solvent companies can use a health check to identify growth opportunities, companies at high risk of becoming insolvent can use the findings to make positive changes. If you find your company is in danger of becoming insolvent, strategic, tailored and actionable advice from a licensed insolvency practitioner can secure a turning point for businesses in the red. For a free, confidential consultation about your business if you have concerns about its ongoing viability, reach out to Gillian Sayburn, Director at Begbies Traynor Group for Newcastle and the wider North East region.