Six months of the year are behind you, which makes July the perfect time to stop, review your numbers, and make any adjustments needed to finish the year strong.
Many business owners wait until tax season to find out how their business performed. By then, the opportunity to make meaningful changes has already passed. A mid-year business financial review gives you time to improve profitability, manage cash flow, and prepare for potential tax obligations before year end.
Start by comparing your actual revenue to the goals you set at the beginning of the year.
How is Your Performance?
If you planned to generate a certain amount of revenue, are you at least halfway there? If you have reached 50 percent or more of your annual goal, congratulations! Now is the time to ask a few additional questions.
- Are you significantly ahead of your projections?
- Will your increased profitability create a larger tax liability?
- Do your estimated tax payments need to be adjusted?
- Have you been postponing equipment purchases or other investments that would benefit your business?
Profit Greater than Estimated?
If profits are exceeding expectations, you may have the cash available to invest back into your business. Purchasing needed equipment, upgrading software, or making other strategic investments may reduce taxable income while helping your business continue to grow. Before making any major purchases, talk with your CPA to determine whether the timing makes sense for your specific tax situation.
Not Where You Thought You’d Be?
On the other hand, your review may reveal that you are not where you expected to be.
Lower sales, higher expenses, or a combination of both can quickly affect profitability. Rather than becoming discouraged, use your financial reports to identify areas where improvements can be made.
Consider questions like these:
- Are there expenses that can be reduced?
- Can you negotiate better pricing with vendors by paying invoices more quickly?
- Are there processes that can be improved to save time and money?
- Have your costs increased enough that your prices should be adjusted?
While some expenses, such as rent, insurance, and payroll tax rates, are fixed, many operating costs can be managed with careful review and planning.
If profits are lower than expected, you should also discuss your estimated tax payments with your CPA. Reducing those payments, when appropriate, may allow you to keep more cash in your business throughout the remainder of the year.
Of course, all of this depends on having accurate, up to date financial information.
Need Assistance?
If your bookkeeping has fallen behind because you've been focused on serving customers and running your business, you may not have the reports needed to make informed decisions. That is often the first sign that it's time to partner with a professional bookkeeping company.
Accurate bookkeeping is more than a tax requirement. It provides the financial insight you need to make confident business decisions throughout the year.
If keeping up with your books has become overwhelming, Affordable Bookkeeping and Payroll Services would love to help. My team can provide accurate bookkeeping, payroll, and financial reporting so you always know where your business stands.
Contact AB&P at 310-534-5577or contact@abandp.com to learn how we can help you gain peace of mind, stay compliant, and spend more time focusing on the parts of your business you enjoy most
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