Young female accountant at desk smiling to camera. Concept: financial review
By: mmartinez
Read in 9 minutes

Is it time for a mid-year financial review of your business?

It’s July and six months have passed in your business this year already. Many small business owners believe this is the best time to take a good look at their business finances, or in other words, to carry out a mid-year financial review of their business. Is this the right time? The answer is actually YES and NO! How is that possible?

When is the best time for a financial review of your small business?

Let’s start with NO first and then go deeper into the YES. The reason it’s NOT the ideal time to take a deep dive into your finances is, this detailed accounting and financial review should be getting done monthly, not only at mid-year. Basically, every month accounting tasks must be completed and books closed, so that management can confidently make their financial business decisions based on real-time, accurate financial data.

If that is not the case for your business finances at this time, you will definitely want to revisit your current engagement with your accountant and your financial team. It’s never too late to create a strong financial team that will join you on the path to success!

Now let’s go deeper into the YES and what is important to consider at mid-year, assuming you have been taking care of your finances on a monthly basis.

What should you cover in your mid-year financial review?

These are the three basic questions you should be able to answer when performing a mid-year review of your small business:

  • What’s happened?
  • What’s next?
  • What shouldn’t you wait for?

What’s happened?

You need to be able to determine the progress of your small business. In order to answer the question “what’s happened”, you first need to know the basics: what is a “mid-year financial review?”. A mid-year financial review tracks the progress of a business’s financial decisions over the past six months and more importantly, allows for trajectory pivots and adjustments based on the company’s financial position and goals. In other words, it’s the “mid-year financial checkup” for the company, that includes a diagnosis of what needs to be done to achieve short-term and long-term goals.

During this initial step of your financial review, you should look into three important documents that will let know accurately “what has happened” in your business finances as of a certain date.

Let’s briefly cover the 3 financial statements that will need to be prepared and reviewed by management so the right decisions can be made:

1. The Income Statement:

An income statement calculates your business’ revenues, expenses, and net profit/loss over a specific period of time. It reports business performance which may indicate current profitability/net loss and is commonly compared to separate accounting periods, such as this year-to-date versus last year-to-date. You can find here everything you need to know to prepare an income statement.

2. The Balance Sheet

While the income statement provides details about the performance of your company for a specific period, the balance sheet reflects the financial condition of your business on a specific date. It provides a “financial snapshot” of your business by providing information on the following items: what you OWN (your assets), what you OWE (your liabilities), and what’s LEFT OVER (your equity). This financial snapshot is also referred to as the accounting equation: Assets = Liabilities + Equity.

3. The Cash Flow Statement

This may be the scariest of the three, but in many cases, it’s the most critical one document to consider in a financial review because it specifically reflects “where your cash is coming from and going to”. The good news is that if you are properly accounting for all the transactions needed to prepare your income statement and balance sheet, then it’s much easier to prepare your cash flow statement. The final step is simply to build this report using the accurate financial data you already have on hand. Check out this article on how to prepare a cash flow statement. And remember, the help of a professional accountant can be critical in this important step: find out here how an accountant can help with cash flow management.

What’s next?

 Now that you have the financial reports needed to begin your mid-year financial review, it’s time to discuss with your financial team “what’s next” for your business.

Even if you have a collaborative and open communication relationship with your accountant during the year, it’s important to remember that you and your management team are the only ones who know the bigger and most exciting plans and updates for the future. When you inform your entire team on these plans and goals, you begin to create a forward-thinking culture where all the players can be ahead of the game.

A few examples of what you would want to keep your team abreast may include:

  • Changes to the organizational structure, leadership and/or ownership
  • New income/products streams that have been launched or are soon to be launched
  • Resource reallocations to additional spending or decrease in expenditures
  • Customer acquisitions that need to be structured into accounting workflows
  • Large asset purchases or dispositions
  • Injection of cash/capital inflow or large cash payoffs/outflow

What shouldn’t you wait for?

It’s time to set the record straight and be honest about the mid-year financial review process. Up to this point, we have assumed that your accounting has been completed accurately every month, in real-time and by a strong financial team that has your back and knows your company’s goals. However, if we look at the statistics, nearly half of established businesses don’t have an accountant, based on a recent 2018 BPlans Small Business Survey. This statistic can also be corroborated with the recent study by Intuit that reflected that approximately 60% of small business QuickBooks users are currently supported by an accounting professional, which leaves a whopping 40% without an accounting formal guidance. That said, the study also showed that 89% of those small businesses that had a strong financial team were more successful when working with an accounting professional.

In other words, you shouldn’t wait any longer to have a professional accountant on your team. Why is this so important? For your business to truly thrive and make stronger, more confident decisions from your financial statements and to meet your future goals, you need an expert in your corner to turn your financial data into tangible dollars! A professional accountant can also guide you to know if it is the right time to apply for a business loan to grow your company.

There is no reason to be in business on your own when there are thousands of qualified and passionate professionals that want to see you win! If you find yourself at mid-year without an accounting professional and without the data to move forward with your financial goals, choosing a qualified accountant is what not to wait for any second longer; your financial future depends on it!

Keep reading about the steps you need to take to find the right financial professional for your small business


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