Keep Your Business on Track with a Midyear Budget Checkup

We are halfway through 2022! So it's an excellent time to review your company's forecast and budget for the rest of the year. Trust us; it will make a massive difference in the year-end closing process if you evaluate your budget and set goals for your company.

Here are some things to remember when you do a budget review mid-year.

Are your expenses in line with your income?

While your business expenses may be on budget, what about your income? Unfortunately, many businesses are still experiencing income losses from the pandemic. So while your costs might be on track, income may fall below your expectations. Contrarily, you may have to adjust your budget if income exceeds projections.

Are there budget adjustments that you should make for the remainder of the year?

It is essential to evaluate your annual budget regularly. Then, if necessary, adjust it. Perhaps your business saw an opportunity to grow unexpectedly. However, the expansion may not be possible because of budget limitations. You may also have received a grant or loan you didn't expect when you set your budget. You should ensure that your budget accurately reflects your financial reality and make the adjustments necessary to get you through the rest of the year. It's a great time to review and adjust your budget mid-year.

Are you achieving your goals?

It's an excellent opportunity to review your year-end revenue goals and look at where you are. What can you do to improve your year? First, reallocate funds when necessary while you make budget adjustments. Now is the best time to make the required changes to get your business to where it needs to be next year. Are your goals too lofty? Move forward by setting new goals.

Are you on top of your bookkeeping?

Keeping the books balanced at the end of each month is one of the most challenging things small businesses have to face. Consolidating your books monthly or at least every other month will help you save time, money, and stress in closing the year, tax planning, and organizing your data for the next tax season. In addition, financial insights will assist you in budget adjustments and cash flow management. Cloud accounting software such as Xero allows you and your outsourced accounting team to work together securely and virtually.

Are you collecting all the information necessary to send 1099s on time?

You must collect W-9 forms from contract employees and vendors to file 1099s by January next year. You don't want to have to scramble for this information at year-end. In addition, we recommend that you request a W-9 whenever you establish a business relationship with a new vendor.

You will find it easier to adjust your budget and forecast for the remainder of the year if you already use cloud accounting software. This is because your books are likely to be current. All of the reports and statements necessary to see the whole picture of your company's finances will be available to you. Mid-year is a good time to switch to the cloud if you are still using desktop software or manually entering your data.

Apps such as Xero and Expensify, Gusto, and Hubdoc eliminate the need to enter and report manually. Instead, these apps provide real-time insight into your business finances, allowing you to adjust budgeting when needed. In addition, cloud-based accounting software makes forecasting and budgeting easy for the current year and future.

It's an excellent time to go through your books mid-year with a fine-toothed comb. Examine your books for anomalies, excessive spending, or other questionable expenses. You may have something missing or misclassified. This can help you catch mistakes before they become a big headache.

We are here to help you with your accounting questions when in doubt. In addition, we are available to answer any questions you may have about your company's budget review and mid-year evaluation.