Checklist for a financially sound business

How do I know that my business is financially fit?

You can recognise a financially healthy business by a number of characteristics. The main ones are:

• A positive cashflow.
• You have a buffer for when things are not going so well.
• Your profits are stable.
• You have insight into your figures and understand them.
• You have a financial plan that allows you to look ahead.

How do I make sure my business stays financially fit?

Keep track of your customers and suppliers and make time for your finances.

1. Keep track of your customers

• Know your customers: check your (new) client's details in the KVK Business Register. 
• Check the payment history of your (new) customer with a credit reference agency.
• In your quotation, clearly state what you are supplying and under what conditions.
• Use general terms and conditions.
• Consider asking for pre-payment.
• Consider using factoring.
• Send a clear invoice and use a payment link (QR code, iDeal/Wero, or Tikkie).
• Send your invoice immediately after delivery.
• Contact your customer if they do not pay on time and send a reminder.
• If no payment is made, take further collection measures.
• For future orders, consider your previous experiences with the customer.

Signs that indicate that something may be wrong with a customer:

• Your customer is located in an illogical place.
• Your customer has a negative credit rating.
• Your customer delays decisions.
• Your customer orders less or less often, or orders cheaper products.
• Your customer pays later than usual, asks for a payment plan or does not pay at all.
• Your customer does not respond when you contact them.
• Your customer receives negative reviews on social media.

2. Keep track of your suppliers

• Know your supplier: check your (new) supplier's details in the KVK Business Register.
• Use multiple suppliers so that you are not dependent on a single supplier.
• Check the terms of delivery and, if necessary, draw up your own purchasing terms and conditions.
• Compare the prices of different suppliers.
• Build a relationship with your supplier.
• Do not pay the entire amount of the delivery in advance.
• Review your subscriptions to save costs.

Signs that indicate that something may be wrong with a supplier:

• Your supplier delivers products and services of inferior quality.
• Your supplier makes unusual price changes, offers discounts or suddenly asks for payment in advance.
• Your supplier sends incomplete invoices or sends them late.
• Your supplier delivers late or not at all.
• Your supplier does not respond when you contact them.

Know your finances

Regularly assess the financial indicators of your business, either on your own or together with your accountant.

3. Keep track of your business operations

• Pick a fixed day every week to do your administration and look at the figures.
• Keep track of how much is in your account and what your income and expenses are.
• Take a critical look at your expenses and costs.
• Make sure you have a financial buffer.
• Stay on top of your debtor management, so you know who owes you money..
• Make a good prognosis: your financial expectations for the coming year, based on the figures for the current year.
• At least once a year, think about adjusting your product prices or your hourly rate. 
• Do not invest until you have enough funds and know what the investment will yield.
• File tax returns on time and pay taxes in time.
• Manage your inventory.

Signs that indicate something is wrong with your business:

• Your turnover and profits have been declining for several months.
• You have payment arrears and difficulty paying bills on time.
• You are using private funds to pay bills.
• You are sending your invoices late.
• You lack overview, which means you do not know how your business is doing financially.