Business Analysis

What is the Business Analysis?

The Business Analysis (BWA) contains important information about a company’s costs and revenues and reflects its financial performance based on data fromfinancial accounting. This is typically done on a monthly basis. Compared to the balance sheet, which is prepared annually, it is based on more up-to-date figures.

The Importance of the BWA for Businesses

Although there is no legal requirement to prepare a business analysis (BWA), it is of great importance to companies. It serves as an early warning system and enables business owners to continuously monitor the financial performance of their companies. By regularly analyzing the BWA, potential weaknesses and risks can be identified, allowing for timely corrective action. This is particularly important for small and medium-sized businesses, which often have limited resources and need to avoid financial bottlenecks.

The BWA not only provides information about a company’s current financial situation, but also serves as a basis for informed decisions. During loan negotiations with banks, the BWA is an important tool for demonstrating the company’s financial standing and strengthening its creditworthiness. It can also serve as evidence of expected profits when reviewing income tax prepayments. Furthermore, it plays a crucial role in evaluating potential business partners or in preparing for business mergers.

What should be included in a BWA?

The content of a BWA can vary significantly depending on the industry and the company. In general, however, it should include all relevant data, costs, and revenues that are to be compared. Certain key metrics play an important role here, such as the equity ratio, return on total capital, return on investment, and return on sales. These metrics enable a detailed analysis of financial performance and provide insight into the company’s profitability.

What types of business analysis are there?

There are three types of BWA, and depending on the company's situation, it may make sense to use more than one variant.

1. The short-term income statement: This is the most commonly used format and compares costs, revenues, and profits with total costs and sales. The short-term income statement provides a simple and clear overview of the financial situation.

2. The statement of changes in financial position: It compares the sources and uses of funds from two consecutive balance sheet dates and identifies changes.

3. Statistical liquidity: This compares a company's assets and liabilities.

Who prepares a BWA?

The BWA is typically prepared by a tax advisor or a certified public accountant. These professionals have the necessary expertise and experience to accurately analyze financial data and prepare meaningful BWA reports. A professional BWA enables business owners to understand their company’s financial situation and make forward-looking decisions.