Tuesday March 8 2016

Why your business needs a health check

By Paul Njuguna

Majority of us, if asked today, will attest to having visited a physician, a dentist or at the very least a pharmacist the last one year or so. In our lives as humans it is vital to do so at least every year or even mid year. It sometimes makes the difference in how long one may live. A business entity, just like humans, is no different. There is need for a business to undergo a health check at least every two years. Quite different from an annual external audit, a health check will entrench into the operations, marketing and sales, the people and culture as well as the business systems with a keen interest in improving efficiency and ultimately the performance while an annual external audit will basically focus on reporting what happened over a given period. On the other hand, it is different from an internal audit considering the diversity of the issues handled.

Credible physicians
It is a paradox during a football match that spectators are the best footballers. They always fault the players for lost chances. They only become the best in that context because of the bird’s eye view advantage. They simply have a big picture of the football pitch. Similarly, a business in need of a health check quite often will require the services of a firm or an individual with a wealth of experience pertaining to the industry. As such, an audit firm or an individual working in the capacity of a consultant will suffice as a credible physician for the exercise.

Terms of engagement
Once a physician is identified, the big question would be the scope of work to be done and definitely the time span to accomplish the said health check. Here it will be a question of how sick the patient is. Usually, the auditor will assess and give recommendations on the nitty-gritties of the different processes that the company undergoes. If say, you gross billions of shillings in revenues and the entity has experienced a depressed bottom line over the years, a health check would suggest probable ways of streamlining the bottom line. It would also give a green light into whether the entity is ready to scale up or not. If the business situation is that of a systemic cancer, then the longer and wider the engagement.

Ultimately, an independent check of the company’s overall operations will reveal the weaknesses and threats in need of a remedy and on the other hand the strengths and opportunities that need to be capitalised on.

Paul Njuguna is a financial and cost accountant. Email:paul@paulnjuguna.com