How to conduct a mid-year financial review

Being able to adjust your financial strategy as needed ensures you are prepared for anything that may come your company’s way.

Knowing the financial health of your business is vital; by carrying out regular assessments you allow the best version of your company to flourish.

For a small and medium-sized enterprise (SME), carrying out a financial review mid-year is essential. Financial reviews provide valuable insights, giving you information on the past, present, and future of your company’s overall well-being.

5 steps to complete your mid-year financial review

1. Review your budget

Projected budgets are great to give you a target to aim for in the coming year. Reality, however, is rarely kind to your plans. Reviewing your actual figures and how they compare to your projected budget is crucial.

There are a number of ways to carry out this exercise, with tools like Fluidly and of course our accounting services here at CTT. By looking at invoice payments, direct debits, and other regular payments and then comparing this to your projections you can see any discrepancies easily.

Once you have done this, discovering the reasons your budgetary projections may have diverged allows you to course correct and create a far more accurate projection for the rest of the year.

2. Analyse revenue

When carrying out a review of your budget you’ll see the various ins and outs of the cashflow for your business. With the information on any unexpected increases or decreases in the amount you anticipated you’ll be able to correct any issues before they become a problem.

Analysing your income every six months like this means that you can adjust your financial trajectory without any major retooling of your budget. It’ll be rare that any financial issue will become a major problem within six months unless there has been some serious mismanagement occurring.

3. Review investments

Small savings add up to big gains over time, no matter how much you can put aside, it all counts in the end. Taking a look at the status of your investments and savings regularly, allows you to make sure your money is still working for you. Get in touch with us for some professional advice on how to invest and save effectively.

Creating ways to generate wealth is an important step for small businesses especially. Investing effectively helps you prepare for the future and uses your money intelligently rather than simply accruing it as your business grows.

4. Review your tax strategy

Failing to plan strategically for the tax of your business can lead to a much bigger impact on your finances than is necessary. At CTT, our advisers help you to navigate the minefield of tax implications and tax law as it affects your business. There are often tax incentives that you may be unaware of and ways to optimise your tax payments to make a substantial difference to your bottom line.

5. Return to your financial goals

Once you’ve carried out your mid-year review, it’s time to reassess your financial goals. These could be personal or professional, the important thing is, are they still attainable?

Armed with all of your current financial information, you’ll be in the best position possible to review and amend your goals as necessary.

Seeing how close or far you are from reaching your goals informs you how to strategise going forward in order to reach your goals when you expect to.

As part of your financial review, also consider:

• Reviewing your business plan – If your company is still in its infancy, you can review your business plan as part of this process. Since a business plan includes a financial projection it’s a handy document to compare against when reviewing your actual financial income.
• Looking at your profit margins – Calculating your gross profit margin is a simple way to see how well your business is faring. Subtracting the costs of total sales from the cost of running your business, then dividing that figure by the total sales figure and multiplying by 100 gives you a gross profit margin percentage. This rough ballpark figure of how well you are doing is a quick indication, helping you get a sense of the overall health of your business.
• Reviewing debt and liabilities – Look at outstanding debts, credit cards, loans, etc. Review the repayment schedule you have in place for these, making sure that these payments are factored into your mid-year review. Be aware of the interest accrued on these debts and calculate if your debts are still manageable.

Takeaways from carrying out a financial review

A key part of your financial review is to then adjust your strategy accordingly. What are the main areas to consider when making these adjustments?

• Forecasting – Creating a new projected forecast will give you a much better idea of how close you are to truly achieving your financial goals. This update to your existing forecast helps you plan much more effectively for your business as a whole, not just as a tool to amend financial goals.
• Investments – Reviewing your current investments with a professional adviser will also open up new avenues for investing as well. If your investments aren’t generating the return you were expecting, or if you have cash you wish to invest, this is a perfect time to discover new opportunities.

 Budget adjustment – Use the information to amend your budget, allowing it to reflect the financial reality you are in. Allocating funds where they are most needed means your business runs with much better efficiency. A mid-year financial review gives you greater flexibility with your revenue and is an essential step toward maintaining the health of your business.

A financial review keeps you on track to meet your goals

Contact CTT Accountancy for support with your mid-year financial review. Our expert advisers will help you collate all of the information you need to create a comprehensive overview of the financial well-being of your business.

We’ll also advise on the best course of action to take when we have completed your review. CTT Accountancy believes in giving you the knowledge and tools for unparalleled business growth. Get in contact today.