Mid-Summer Financial Review: Start With the Numbers

Mid-summer is a good time to pause and see how your business is performing.

By this point in the year, you have enough financial information to spot patterns, compare results with your original plan, and make thoughtful adjustments. Reviewing the numbers now gives you time to act before year-end.

Start with these four areas.

Compare actual to budget

Review year-to-date revenue and expenses against your original budget. Pay close attention to large differences. Revenue may be above or below expectations. In addition, payroll, insurance, supplies, or other costs may have changed since the beginning of the year.

Don’t stop at identifying the difference; instead, try to uncover why it happened. Consider:

• Were the original assumptions realistic?
• Did an unexpected expense affect results?
• Have customer demand or pricing changed?
• Are certain costs continuing to rise?

Use what you learn to update your budget for the rest of the year.

Review profitability by product or service

Strong sales do not always result in strong profits. Review how much each product, service, location or customer group contributes to your bottom line. Some areas may generate substantial revenue but also require more labor, materials or administrative time.

Consider whether your pricing still reflects current costs. You may need to adjust prices, revise service packages or focus more attention on the work that produces healthier margins.

Check your cash flow

Profit and cash flow are not the same. A business may report a profit while still struggling to cover payroll, taxes, or vendor payments. Review how much cash is coming in, how much is going out, and when those transactions occur. Pay attention to:

• Slow-paying customers
• Large upcoming purchases
• Seasonal revenue changes
• Loan payments
• Tax obligations
• Owner distributions

Prepare a cash flow forecast for the rest of the year. This can help you identify possible shortages early and plan around them.

Review accounts receivable

Look at your accounts receivable aging report and identify overdue invoices. Older balances can become harder to collect. Contact customers promptly and resolve any billing questions that may be delaying payment.

This is also a good time to review your invoicing process. Sending invoices sooner, offering electronic payment options, and setting specific payment terms can improve collections.

What comes next

A mid-summer financial review should give you a better picture of where the business stands today. The next step is deciding what to change.

In the second article in this series, we will cover expense reviews, tax planning, and updated goals for the rest of the year.