How to Perform Financial Risk Analysis

How to Perform Financial Risk Analysis

How to Identify Potential Risks Financial Risk Analysis looks at a company’s problems it could potentially encounter in daily operations. When changes in financial markets, legal liabilities or even manmade disasters occur, business operations can be disrupted. Once you identify potential risks, you can then prioritize them and take action steps to handle them, which include avoiding the risk, reducing negative effects, accepting the consequences of the risk, or transferring the risk elsewhere. As a growing company, proactively managing business risks will help you sustain growth. But, before you start identifying risks, assess your business. Ask yourself what could affect key services you offer or what could affect your staff. There are four main categories of risk you should consider to help you identify potential risks within your business: Compliance – These are risks related to the need to comply with rules and regulations. For example, you may need to think about whether health and safety regulations could increase your overhead costs. Strategic – These are risks associated with operating in a particular industry like companies merging, industry changes, or research development. You want to think about the strategic risk of the possibility of a company in China acquiring one of your competitors in the U.S. You want to be prepared with a response by considering different scenarios. Financial – These risks include your business transactions and your financial systems in place. To identify financial risk, examine your daily financial operations, particularly cash flow. Operational – These risks are linked to your company’s administrative and operational procedures ranging from your IT systems, to regulations to recruitment. For instance, if you’re...
How to Improve a Business Using Benchmarking Analysis

How to Improve a Business Using Benchmarking Analysis

Why You Should Be Benchmarking If you are a business owner, an accountant or business coach advising a growing business, measuring the company’s performance can help improve productivity and profit. Measuring performance keeps track of the business’s progress and gives you information to implement a target-setting system allowing you to strategize a plan for growth. Benchmarking a business is the process of evaluating it and comparing it to other businesses or internally based on measurements. It’s a great tool for improving your understanding of a company’s performance and potential. Who You Should Benchmark Against You can benchmark internally within the business. For instance, you can examine performance among departments within the company. Or you can compare the business to other businesses in the same industry. Yours or client’s company’s objectives and market position will also play a role in the comparisons you’d like to make. Info Entrepreneurs, a team of business information experts from the Board of Trade of Metropolitan Montreal says, “For example, a small business in a crowded sector may want to benchmark itself against average performance levels in the sector. But a business targeting rapid and significant growth may choose comparisons with an established market leader.” What to Measure Different industries and companies within an industry measure success differently. But, these financial measurements or benchmarks provide a quick evaluation of a business’s financial health: Net Profit Margin – This is the most important measurement. It is calculated by dividing net profit by revenue. By using this, you can understand how each dollar earned by the company is translated into profits. Liquidity Ratios – You should review two...
Preparing For Your Business Loan Application

Preparing For Your Business Loan Application

How To Get a Business Loan Applying for a business loan is an exciting start in your journey towards entrepreneurship. But, it can also be a stressful and intimidating experience. The good news is that state and local economic-development agencies and various nonprofit organizations provide low-interest loans to small business owners who may not qualify for traditional commercial loans. Whether you are applying for a business loan through these lending institutions or applying for a traditional commercial loan, these four tips will help you prepare for this next step in your career: Research Lender Options You need to do your homework on the financial institution in which you’re considering applying for a loan from. Lenders can perceive ‘good risks’ differently from each other. Whether a business owner and the business is a good risk is a major concern of any financial institute because regulatory requirements sometimes influence the types of loans that can be approved. Script Out Your Need The top reasons for declined loans are related to the quality of the business’s earnings or cash flow or the business’s insufficient collateral. In order to meet the lender’s requirements, make sure you ask a lot of questions to eliminate any confusion. Then, have a detailed plan of how you are going to use the money and how you are going to repay it. For instance, identify whether you plan to purchase new equipment for your business or whether it will go towards working capital. You may have a different reason for why you need funding, too. Also, explain what caused you to need help with funding. The document you prepare...
5 Business Valuation Software Methods You Need to Adopt

5 Business Valuation Software Methods You Need to Adopt

What is Business Valuation? Are you curious about how much a company is worth? If the owner is planning on potentially exiting or selling his or her business, learning the company’s worth is critical. This is when Business Valuation Software comes in handy. Business valuation is the process of determining the economic value of a business or company. Financial market participants including business buyers and sellers, corporations, banks, portfolio managers, and venture capitalists use valuation to determine the price they or their client is willing to pay or receive during the sale of a business. Knowing the most basic concepts of business valuation goes a long way in determining the approximate worth of your interest in a business or if you are selling your business, it gives you an idea of a realistic selling price. Watch this video to learn how to determine a company’s worth using IndustriusCFO’s Business Valuation Calculator Module: Our Business Valuation Calculator Features: Analyze existing or past performance to obtain an estimated company value. Quick benchmarking against industry peers. Benefits Quick assessment of a company’s worth based on a variety of effective business valuation methodologies. Provides a good initial estimate of a company’s worth. Why Should You Learn about Valuations? “Valuation is an important skill set to have, largely for portfolio managers,” said Mark Staniszewski, IndustriusCFO account manager. “The majority of business owners don’t have valuation skills and thus, end up paying a premium for formal valuations.” Learning how to calculate business valuation eliminates the need to pay these prices for a business appraiser – if all you need is a ball-park perspective of a company’s worth. Learning business...
CPAs: Increase Revenue This Tax Season

CPAs: Increase Revenue This Tax Season

Make More Money During Busy Season If you’re a Certified Public Accountant, you know that March is one of the busiest months of the year for you. April 15 is your deadline so your workdays during tax season turn into late nights at the office. It’s your busy season. Even if you feel overwhelmed with the work you have, it’s important to continue to increase revenue for your accounting firm. Don’t get buried in your work so much that you miss this opportunity to grow. Here are some tips to help you get started: Help Your Client’s Business Become Successful At an upcoming meeting with a client, discover what they need help in making their business more successful. Think about the services that your firm offers and consider whether they would resonate with your client. Educate Your Clients While preparing your client’s taxes, they will naturally have questions for you about their income or business. They trust you with their financial information and you owe it to them to educate them and ask them questions in return. At times, your clients ask simple questions about new write-offs, tax incentives, etc. Follow up with a question, such as, ‘What made you ask that?’ Engage with your client and share your knowledge. This rapport-building is also a great relationship-building tool. In an era when convenience triumphs loyalty, CPAs need to continuously work to build relationships with their clients. Learn How to Say No For many accountants, it’s hard to say no to taking on a new client. During the busy season, you may have feelings of regret for taking on a certain...
The Importance of Emotional Intelligence in Business

The Importance of Emotional Intelligence in Business

Why You Need Emotional Intelligence to be Successful in Business Here at IndustriusCFO, we give business owners, coaches and advisors all the financial analysis tools they need to serve their customers. However, they need more than this to succeed with their clients – they need another kind of smart: emotional intelligence. Emotional intelligence is the ability to monitor your own and other’s emotions, use emotional information to guide your thinking and behavior, differentiate emotions and label them appropriately. In the last few months, there’s been a buzz around the importance of emotional intelligence and using it to make more money from Entrepreneur, Business Insider, and Fast Company. According to a November 2014 study published in the Journal of Organizational Behavior from Germany’s University of Bonn, individuals who displayed emotional intelligence were more likely to make a larger annual income than their colleagues with less emotional intelligence. Being able to read emotions was linked to being able to navigate the workplace better. In the experiment, 142 adults were asked to label emotions based on listening to children and actors expressing their feelings and looking at photographs. Those who identified the emotion correctly in 87% of the cases were categorized as having high emotional intelligence while those who scored below 60% were deemed as having low emotional intelligence. Then, researchers asked the participant’s colleagues and supervisors to assess the participant’s political skills whether they were influential, sincere and good networkers. The results: those who could recognize emotions also had increased social and political skills – and higher incomes. Why is Emotional Intelligence Important in the Workplace? A high degree of emotional intelligence...

Welcome to IndustriusCFO

Welcome to IndustriusCFO, the next generation of Financial Intelligence. IndustriusCFO brings together financials from privately held companies across the U.S. and enables you to easily determine how you compare to your industry peers. Checkout our industry leading IndustriusCFO Financial Scorecard and compare yourself to your peers using our Industry Metrics reports that pull from over 2500 industries and nearly 1,000,000 privately held businesses in the...