Mid-Year Financial Review

It’s July, and we are midway through the year. Financially speaking, one of the things on your to-do list should be a mid-year financial review of your budget and your books. Before small problems and mistakes become big and unwieldy, you can get things shipshape and review your progress toward your goals. At Happy Bookkeeping we do a mid-year review for all our clients to make sure things are great before we start on the rest of the year.

Image caption reads "Finance Tips:  Do a Mid-Year Financial Review" with a piggy bank atop money and reports.

What are the steps to take to review your books? Just three things.

  1. Review your transactions.
  2. Check if you’re on track.
  3. Figure out your adjustments.

1. Review your transactions.

The first thing to do in your review is make sure that your bookkeeping so far makes sense. Is everything where it needs to be? Did you accidentally mark a software purchase as meals and entertainment? Now is the time to check.

It’s easy to do – just print out a list of your transactions so far this year. Organize them however it most makes sense to you – by date, by account, or by vendor. I usually group them into Accounts, then sort them by vendor name, then by date. Look through everything and make sure there aren’t any omissions or errors.

Mid-year financial reviews are also a great time to check on things you’re not sure about. Do you have transactions that you were going to ask your bookkeeper or accountant about? Do it now and get your books updated. Your finance team will thank you for not doing it during tax time.

Now that your transactions are all where they’re supposed to be, you can run some reports and feel secure that they’re accurate. Accuracy is important – you want to be able to confidently make decisions based on the data you have.

2. Use reports to check if you’re on track.

Two reports that are helpful in making sure things are on track are a Budget Vs. Actuals report and a Previous Year Comparison report. (Don’t have a budget? Maybe it’s time to start with a half-year budget!). Mid-year financial reviews should include different perspectives for reviewing profit, expenses, and cash flow.

  1. Is your income where it’s supposed to be? The Budget vs. Actuals report helps you compare your actual revenue (gross and net) to your target goals. Are you where you want to be for the year so far? Are you falling behind or getting ahead?
  2. Are your expenses on track? Were they higher (or lower) than expected? Look at each category if they’re higher than expected and see why. Did you have any costs that were unforeseen and out of budget?
  3. How are you doing compared to last year? The Previous Year Comparison report can help you understand if you profit has gone up or down, and help you see if expenses have risen or not as well. Looking at prior years helps give you a baseline for evaluating the current year.
  4. How is your cash? Looking at your budgeted expenses for the rest of the year, will you have enough cash to cover them? Our firm runs Cash Flow Forecast reports for clients to help with this issue.

3. Mid-year financial review adjustments.

Mid-year financial reviews are a great time to make budget and income adjustments.

Is your income falling behind your goals, or behind last year’s markers? What steps can you take to increase income in the second half of the year? Are there promotions you can run, contacts you can be in touch with, or marketing adjustments to be made?

Another way to address lower profit is expenses. Were your expenses more than you expected? Is there something you can cut out to give you more breathing room? Maybe you need to adjust your budget because of unforseen expenses that will occur in the second half of the year. Now is the time to do that and get a sense of what your profit and loss will look like for the coming months.

Finally, if your cash is feeling low, make plans to shore it up through some combination of increased income, lowered expenses or financing. Make sure you know that you’ll have enough cash on hand to meet your expenses for several months out.

Go forth and conquer!

Now that your mid-year financial review is done, you can start the rest of the year with a better handle on your business. You also have a clean set of books that you can rely on for good financial information for decision-making.

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