We’re halfway through 2021! June is a great time to take a look at your company’s budget and forecast for the remainder of the year. Evaluating the budget and company goals now will make a big difference in your year-end close process. Here are a few things to consider when doing a budget checkup midway through the year.
1. Are your expenses aligned with your income?
Your business expenses might be right on track with your budget, but what about your income? The pandemic continues to impact income at many businesses. Although your expenses may be on track, if income is below what you expected, you’re going to need to adjust your budget. If income is over your projections, you may need to account for higher expenses.
2. Do you need to make budget adjustments for the rest of the year?
A yearly budget is something that should be evaluated on a regular basis and adjusted when necessary. Maybe the business had an unexpected opportunity to expand. Just because the forecasted budget doesn’t allow for the expansion doesn’t mean it shouldn’t happen. Further, ongoing changes to covid relief programs may mean you’ve received a loan or grant that you didn’t anticipate when you set the budget. Make sure your budget is reflecting your financial reality, and adjust as needed to carry you through the remainder of the year. A mid-year budget checkup is a perfect time to evaluate and make adjustments.
3. Has your company hit your forecasted goals?
This is a great time to take a step back and review progress toward your revenue goals for the year. If you’re off track, what changes can you make to finish the year strong? As you’re making budget adjustments, take the opportunity to reallocate funds as needed. Now is the perfect time to make the necessary changes to get the business where it needs to be this year. Do your goals seem unrealistic? Set new ones and move forward.
4. Are you keeping up with your bookkeeping?
One of the biggest struggles small businesses admit to is locking down the books at the end of every month by reconciling all accounts. Reconciling your books monthly (or at least mid-year) will save time, money, and stress when it comes to closing out the year, tax planning, and organizing your data for the next tax season. You will also gain financial insights that will help you with budget adjustments and managing cash flow. Cloud accounting software, such as Xero, enables you and your bookkeeper to collaborate virtually and securely. If you’re more of a DIY-er when it comes to bookkeeping, check out our free online course, 5 Weeks to Better Bookkeeping.
5. Are you collecting the necessary information to send out 1099s on time?
If your business uses contract employees or vendors, make sure you are collecting W-9 forms from them so you can file 1099s on time next January. Year-end comes with a big enough to-do list—you don’t want to be left scrambling for this information as well. As a best practice, we recommend requesting a W-9 anytime you begin a relationship with a new vendor.
If you’re already using a cloud-based accounting software, adjusting your budget and forecasting for the rest of the year will be easier simply because your books are more likely to be up to date. You will be able to access all of the necessary reports and statements to give you the big picture of your company’s financials. If you’re still using desktop software and manually entering all of your data, mid-year might also be a great time to make the transition to the cloud.
Apps like Xero, Expensify, Gusto, Hubdoc, and Bill.com remove the need for manual entry and reporting. They provide you with real-time insights into your business financials, allowing you to make budgeting adjustments when necessary. Mid-year, and for the new year, budgeting and forecasting are made easy with cloud-based accounting software.
Mid-year is a great time to look over your books with a fine-tooth comb. Look for any anomalies in your reports, overspending, or questionable expenses. There may be something misclassified or not accounted for. Doing so now can catch errors before they become a major headache.
When in doubt, we are always here to assist you in your accounting needs. Contact us if you have questions about your company’s budget checkup and mid-year evaluation.