Each year, like clockwork, we are provided with little calendar reminders of the changing times. As summer starts, schools let out, business might slow down a little and everyone is thinking about taking time off to rest and relax. As an owner of a small- to medium-sized business, you know how important it is to get all your ducks in a row before you take time off, or as a way to make the most of your down time.
This is a great time of year to take a look at where your financials are and where they are projected to be by the end of the year. Most financial experts call this the mid-year financial checkup. Here are a few helpful hints to get you started:
Have the Big Picture in Mind
There is more to a mid-year review of your business than looking at the few months surrounding your checkpoint. For business owners, it is important to constantly have both short- and long-term goals in mind. Do you have any intention of investing in a larger workspace, buying a large piece of equipment or taking on a new marketing plan in the next year or two? The more you can save and finance ahead of time, the less strain you place on your business down the road. Make sure you know how much your future investments will cost the company and keep those goals in sight and on the books.
Reconcile Your Accounts
Money comes in and out of a business every day. You should already have an accounting program in place to help you track all money that goes out and comes in as well as provide a record for future comparison. While maintaining a steady cash flow may seem to handle all of the small daily issues, it is a good idea to be sure everything is in good standing condition.
Have your previous year’s tax return available and compare it to what you have listed as the balance of the last day of the previous year.
Take a look at any loans or credit cards to make sure all the payments are up to date.
Double-check that you haven’t already received payments for any accounts receivable still outstanding. Your books will be unbalanced for the rest of the year.
Evaluate your overhead costs to determine if the budget for monthly expenses needs to be increased or decreased accordingly.
Plan for Taxes and Deductions
With two quarterly payments already behind you, as a business owner you need to ensure you aren’t paying too much or too little on your tax payments. Catching any mistakes before a big tax payment can make the adjustment much easier. This is also a time to look at your capital expenses as well as any opportunity for Section 179 deductions. When investing in a large piece of equipment you have the option of deducting it as a working expense or allowing it to depreciate over time. It is important to know and understand the benefits of both options and which one would be the best option for your company.
Make a Written Plan for the Coming Months
Have monthly goals set in place as well as a contingency plan if business starts to go up or down. You should know on a week-by-week basis if you are covering your basic operating expenses. An increase in business could mean a higher investment in resources or a dip in business could mean it is time to tighten the belt in a few areas of the business. These numbers should be readily available and measurable.
Just as your body needs regular check-ups from the doctor and the dentist, your company needs them, too. It is important to schedule the time needed to focus your attention on the matters at hand to continue running a prosperous business. If anything doesn’t add up or you think you might need a hand in making the calculations, contact a financial professional. The summer months are often quieter than the rest of the year for accounting firms, which make it the perfect time for you to show up with all your questions. Here at Honest Buck, we are always glad to lend a helping hand!
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