The end of the calendar year marks the halfway point for most businesses’ financial year. With the first two quarters of 2024 set to fly by, now is the ideal time for business owners to schedule a financial check-in for January. In this mid-year assessment, we’ll present a valuable opportunity to evaluate your business’s position, reassess goals, and make any necessary adjustments to stay on track over the remainder of the financial year. If you’d like to make an appointment with one of our Varsity Lakes-based Accountants click here
Why a Mid-Year Review is Essential
Conducting a thorough mid-year financial review delivers multiple benefits:
Track Progress on Goals
Examining your progress towards annual targets set earlier in the year allows you to determine what is working well and what needs adjustment. Celebrating wins along the way is motivating and identifying potential roadblocks gives you time to course correct.
Assess Financial Health
Analysing financial statements like your profit and loss, balance sheet, and cash flow reports provides insight into the health of your business. This includes understanding profitability, debt levels, cash flow, client concentration risk, and more.
Optimise Tax Planning
A mid-year review presents an opportunity to implement tax planning strategies to minimise your end-of-year tax liability. Bringing forward deductible expenses, maximising depreciation, and making voluntary super contributions can all help reduce the tax paid.
Adjust Business Operations
Perhaps your offerings need revamping based on customer feedback or you need to fine-tune marketing activities to attract more leads. Making these operational adjustments now allows time for them to positively impact end-of-year results.
5-Step Mid-Year Review Process
Follow these five simple steps to complete your mid-year financial review:
1. Gather Information
Collect financial statements, tax returns, budgets, business plans, and data around sales, customers, marketing metrics, and operations. This provides the information needed to complete your review.
2. Analyse Performance
Compare actual financials and KPIs to budgets and goals set earlier in the financial year. Calculate variances and determine the key drivers behind these, both positive and negative. Assess what is working well and what needs refinement.
3. Brainstorm Improvements
Note down any strategic, operational, financial, or tax planning improvements that could optimise performance and financial outcomes for the remainder of the year. Prioritise these initiatives based on ease of implementation and potential impact.
4. Update Plans
Revise financial forecasts, tax plans, marketing plans, and operational processes to reflect the outcomes of your review. Build in the improvement initiatives and adjust key metrics and activities as needed.
5. Monitor Ongoing Progress
Schedule regular monthly or quarterly reviews to track progress on updated plans and targets. Continually assess performance and fine-tune activities to achieve the best possible result by year-end.
Key Areas of Focus
As an expert business owner and financial manager, make sure your mid-year review examines these crucial aspects:
Financial Position
Scrutinise your balance sheet, focusing on liquidity, debt levels and structure, asset values, capital structure sustainability, and contingency funds. This determines the capacity to fund operations and growth.
Profit Performance
Review your income statement and gross profit margin percentage compared to industry benchmarks. Breakdown performance by product lines and revenue streams. Assess operating efficiency and highlight expenses that can be reduced.
Marketing Effectiveness
Analyse your client list and ordering patterns. Review lead generation and sales conversion rates, as well as the return generated from marketing channels like digital, print, events, referrals, and retention. Identify the optimum marketing mix.
Growth Opportunities
Research market trends and new products that could meet customer needs better. Assess potential improvements to operations, offerings, and processes that enhance productivity. Brainstorm ideas that might take your business to the next level.
Tax Planning
Identify tax deductions and offset opportunities to reduce tax payable for the year. Bring forward any deductible expenses possible into the current financial year. Maximise depreciation claims available on assets. Contribute up to caps for superannuation.
Make Mid-Year Reviews a Priority
A mid-financial year health check provides tremendous value for business owners seeking to optimise performance. Following the five-step review process outlined above and focusing on key financial, marketing, growth, and tax areas will help you finish the year strongly. Being proactive now allows time for initiatives and changes to positively impact your full-year result. So schedule that review for January and set your business up for success leading into the 2024 end of the financial year!
