Featured in:
"Averting
the Crisis"
Gary Goldstick helps companies avoid bankruptcy by Shelly Strom
The
Business Health Index Self Test
The following test provides a way for you to determine
a general diagnosis on the health of your business. The questions cover
a full range of factors that affect the well-being of your company, from
plain dollars and cents to business relationships. The statements presented
refer to conditions which exist within your company. Some statements may
not apply to your business, depending on its size or organizational structure.
In those cases check N/A.
FINANCIAL
Dollar Signs & Other Numbers: What's the Bottom Line?
Liquidity
1.
Collection agencies have filed or threatened to file lawsuits against our firm.
*2.
Tax liens have been filed against our firm.
3.
We never use the “float” in our checking account in order to solve our cash flow problem.
4.
Our controller/bookkeeper does not spend any appreciable time (i.e. more than 2 hours/week) talking to vendors who are requesting payments.
*5.
We are “current” in all of our withholding taxes and sales taxes.
6.
The average collection period for our accounts receivable is no more than 50% greater than the no-discount credit terms we offer.
7.
All of our accounts payable are being serviced in accordance with the agreed terms; that is, are being paid in a timely manner.
8.
Financial statements consisting of at least an income statement, balance sheet, accounts receivable and accounts payable agings, are prepared monthly and reflect both the revenue and expenses for the period.
*9.
Inventory procedures are in effect which insure that we accurately know our usable inventory at the end of the month.
*10.
The accounts receivable balance appearing on our financial statement accurately reflects what our customers acknowledge they owe, and what they are capable of paying under the terms of our agreements with them.
11.
Our “cash in bank” account balance accurately reflects the actual funds in the bank after all the checks have been written and mailed.
12.
The accounts payable balance reflected in our financial statement includes all invoices that have been presented to us for payment, including those which we may be disputing
Growth & Profitability
13.
Unit sales volumes (number of units/hours/tons of merchandise billed) is decreasing.
14.
The company has reported a pretax profit (excluding extraordinary items) for the proceeding two years and expects to report a profit this year.
15.
Selling, general and administrative expenses as a percent of sales are increasing.
16.
The gross profit margin for our major core products has increased over last year’s profit margin.
17.
Major decisions about new business, new products, new markets and/or acquisitions reflect a clear organizational strategy.
18.
The turnover rate of our inventory ( number of turns/year) has improved over last year’s results.
Control Systems
19.
The company has a business plan, which sets forth the company’s strategic and operational objectives, programs for the ensuing year.
*20.
The company operates in accordance with a budget and cash management system that is consistent with its objectives; expenditures against the budget are recorded and monitored. Substantial deviations are periodically analyzed.
*21.
The company’s sales organization prepares sales forecasts and its performance against the forecast is monitored. These forecasts are used to establish inventory and/or personal levels.
22.
The company has a program to quantitatively measure customer satisfaction.
23.
Individual responsibilities for monitoring and achieving financial goals are clearly defined.
MANAGEMENT
Is it Multiplying or Dividing in Your Business Equation?
The CEO's Leadership
24.
Our company has a well-defined mission and set of goals, which is frequently communicated to our employees. The mission and goals are in writing and a copy is available.
25.
The chief executive officer frequently interacts with employees at various levels of the company.
26.
Employees in our company are well informed as to how well or how poorly the company is meeting its stated objectives.
*27.
Our company lacks resources (money, equipment, space, personnel) to meet its short-range objectives and fulfill its contractual obligations.
28.
Major decisions such as organizational changes, capital appropriations and new facilities are guided by a formal well-defined approval process.
29.
A single individual has ultimate responsibility for the company's day-to-day operating decisions.
Key Managers
30.
All of the managers who report to me are qualified by education, experience, loyalty, motivation and competency.
31.
The turnover in management staff has been greater than 20% per year.
32.
There are employees in the organization that are being carried because of family relationships, longevity of service, emotional ties and other non-economic reasons.
33.
I do not believe that the performance of the firm could be improved by replacing any of the key managers.
The Management/Board Relationship
34.
The members of the board of directors are independent-minded and intelligent businessmen and women whose education and experience encompasses the technical, financial and marketing aspects of the industry in which the company operates.
35.
There is a lack of mutual rapport, trust and respect between the chief executive and the members of the board of directors.
36.
All of the directors come to the board meeting prepared to discuss the relevant issues and participate in a constructive manner.
37.
The owners, or major stockholders who are active in management and the affairs of the firm, work very well together; they communicate with each other and in groups, openly and frankly, and have mutual respect for each others' opinions.
38.
The board of directors and/or management meetings are very productive, and the key issues affecting the health and the growth of the company are presented in a professional manner with adequate analytical data. The issues are thoroughly discussed, and rational, timely decisions are usually made.
Over-diversification, Over-leverage and Over-expansion
39.
The key managers of the company are able to carry out their responsibilities within the normal work week and rarely have to work evenings or weekends.
40.
The key functions of the company are adequately staffed with individuals who have the capability to handle their responsibilities in the normal day-to-day manner.
41.
The ratio of the company's total debt to equity increased over the last year.
42.
Debt service (interest plus principle) as a percent of gross profit, has increased over last year's figure.
EXTERNAL FACTORS
Business Affairs: Love at First Sight, but at Second Glance?
Banking Relationships
43.
We frequently receive calls from our bank, advising us that our account is overdrawn.
*44.
We are current in all of our interest payments to our bank and are in conformance with all of the provisions of our loan agreement.
45.
Our banker is friendly, cordial and cooperative, and is always eager to assist us in any way he can.
46.
Our banker calls frequently to inquire about the status of the loan and asks very piercing and serious questions.
47.
Our banker has inquired about our willingness to pledge additional collateral (company or personal) to secure our loans.
Legal Affairs
48.
Except for collection efforts being pursued against delinquent accounts receivable, the company is not involved in any litigation.
*49.
Assuming the company is presently involved in litigation, where it is the defendant, and the "worst case" scenario should occur, the company would be able to pay the resulting judgment and still comfortably finance its continuing operations.
50.
In the case where the company is involved in a lawsuit where it is the plaintiff, the minimum expected recovery will exceed the maximum legal cost to be expended.
51.
The chief executive officer of this company spends more than 10% of his time on the legal affairs of the corporation, including regulatory and litigation matters.
Single Customer/Single Vendor Dependency
52.
More than 35% of the company's receivables or inventory is associated with one customer.
*53.
In the event the company should lose a major customer to a competitor, the company could be reorganized so that profitability was not affected.
54.
In the event the company's major customer filed bankruptcy, so that all the associated receivables and unique inventory had to be written off, the resulting write-down of assets would not jeopardize the requirements of the company's agreements with its bank.
55.
If any of the company's material or support service suppliers suddenly went out of business, the company could easily replace that supplier in a time frame that would not materially affect sales levels, contractual obligations, or profitability.
56.
All of the company's existing suppliers are providing material and services on schedules and of the quality that are consistent with the company's obligations to its customers.
Changes in Market, Technology and Environments
57.
The market for the company's major products and services is quite soft and we must cut prices frequently to preserve our market share.
58.
Our company is among the top four firms (in terms of market share) for the major markets that we serve.
59.
Our pricing policy is tied to the dominant firm in our industry and our price increases and decreases frequently follow their lead
60.
We have, in the ordinary course of business, been able to replace products that competition and technology have made obsolete.
Total
