The Benefits of a Midyear Financial Review
If you’re like most small business owners, you review your finances once a year: probably around tax time, when your accountant is already combing through the numbers.
It feels efficient. It feels like enough. But it’s not.
A year is a long time. Twelve months is enough runway for a promising product line to quietly become a money pit, for a bookkeeping mistake to compound into a serious problem or for payroll fraud to take root and grow undetected.
Waiting until January to find out what went wrong in March is like waiting until your car breaks down on the highway to check the oil. By then, the damage is done. You’re just cleaning it up. This is why most businesses can use a midyear financial review.
Identify Problems While They’re Still Small
To keep the metaphor going, think of a midyear financial review as a routine multipoint inspection for your business. These regularly scheduled pauses, usually around June or July, give you a chance to look under the hood and identify small issues before they become large (and expensive) headaches.
Financial problems rarely announce themselves. They start as a slightly off number here or a missed invoice there, and grow in the dark until they’re impossible to ignore. A midyear review shines a light on that darkness while there’s still time to act.
Say your cost of goods sold suddenly jumped by about 10% right after the new year. No matter when you catch it, you’ll have a conversation with your suppliers and maybe make a pricing adjustment. If you don’t notice until December, that’s an entire year of thinner margins you can’t get back. Catch it in June, and you’ve cut the damage in half.
Fraud Doesn’t Wait for Year-End
Internal fraud is often discovered by accident, and often long after it started. According to the Association of Certified Fraud Examiners, the typical occupational fraud case runs about a year before detection, and organizations that check their financials less frequently tend to lose more money and take longer to catch it.
A midyear review is a built-in checkpoint that makes grifting much harder to hide. Reconciling accounts, reviewing vendor payments and spot-checking expense reports twice a year instead of once cuts the window for bad actors (or bad habits) to operate unnoticed.
You don’t need to suspect anyone on your team to justify this. Good internal financial controls protect honest employees just as much as they deter dishonest ones.
You Get a Real Shot at Hitting Your Annual Goals
Most businesses set financial goals in January and revisit them in December. That means for 11 months, those goals are essentially on autopilot.
A midyear review puts your hands back on the wheel.
Are you on pace to hit your revenue targets or quietly falling behind? Is that new hire paying for themselves yet? Is the marketing spend you approved in Q1 generating a return? Six months in, you still have six months left to course-correct. That’s the whole advantage: A January review can only explain what happened. A June review can still change what happens within the same year.
It Makes Tax Season Less of a Scramble
Nobody enjoys the year-end tax crunch, and a lot of that stress comes from surprises: income that ended up higher than expected, deductions that weren’t tracked carefully enough, estimated payments that were off.
A midyear checkup gives you and your accountant time to make strategic moves (like adjusting estimated tax payments, timing equipment purchases or restructuring compensation) while there’s still runway to act on them.
What Should a Midyear Review Cover?
A useful midyear review doesn’t need to be exhaustive, but it should be thorough. At a minimum, plan to look at:
- Financial statements: Compare your income statement, balance sheet and cash flow statement against your budget and against the same period last year.
- Accounts receivable and payable: Look for aging invoices, slow-paying customers and any payment patterns that seem off.
- Internal controls: Confirm that account reconciliations, expense approvals and payroll reviews are actually happening the way they’re supposed to.
- Tax position: Estimate where you’ll land for the year and identify any tax moves worth making before year-end.
- Progress on goals: Revisit the targets you set in January and adjust your second-half plan accordingly.
None of this requires a full audit. It just requires some attention … though, a little outside perspective doesn’t hurt, either. A second set of eyes may catch what familiarity misses.
Not Sure Where to Start? We Can Help.
A midyear review is only useful if it’s thorough. And for busy business owners, finding the time (or the expertise) to dig into every account, statement and control can be a challenge. That’s where an experienced outside team can make all the difference.
McManamon & Co. is an accounting, tax, fraud, forensic and consulting firm that serves small and midsize businesses. We can provide a wide variety of outsourced CFO services, including helping you conduct a comprehensive midyear financial review, from reconciling your books and evaluating internal controls to identifying tax planning opportunities before year’s end.
Call us at 440.892.8900 or contact us online today to schedule your midyear review.
Tags: financial review, McManamon, small business finances | Posted in McManamon & Co., Small business finances