The opinions expressed by Entrepreneur authors are their very own.
An annual financial plan can aid you regulate your money flow, reduce costs, manage taxes and generate growth. However, regardless of how thorough this plan is, it is vital to organize regular checkpoints and review it throughout the 12 months. By June, it’s best to have an idea of how your company is performing on its annual plan and what to expect for the remainder of the fiscal 12 months. This is a great time to take a closer look, evaluate your company’s performance and make changes.
Here are five questions to ask mid-year to maintain a healthy financial plan:
1. Do you monitor your budget?
Review your income statement to see the way you are doing against your projected budget. Are revenues, expenses and net profit or loss where you expected? Why or why not?
If you do not already have an operating system for budgeting and monthly reporting, or you are behind on it, it could be time to do so seek external support.
2. What is your money flow and runway?
An vital indicator of a company’s health is the flow and timing of money inflows and outflows throughout the 12 months. Mid-year, take a closer look at your money flow statement to understand where your money is coming from and where it’s going. Review elements corresponding to operating costs, working capital and money inflows from current contracts so you possibly can make changes if essential. Here are some questions to consider:
- Do you have outstanding bills that need attention now?
- Are you on track to achieving your goal income?
- What upcoming planned expenses will you would like to prepare for (e.g. equipment purchase, employment, conferences, training)?
- Do you would like to raise your rates to higher adapt to the market?
3. Do you would like to make recent investments in the next quarter?
It could also be time to reinvest money into the business if you have the money available. Do you would like to make larger purchases, increase employment or invest in research and development before the end of the 12 months? If so, the third quarter could be the best time to do it because you have a higher sense of how the 12 months is going.
4. Do you pay the correct quantity of quarterly taxes?
Now that you have made two-quarters of your tax payments, you possibly can see how those payments are tracked against your actual tax liabilities. Do you pay enough to cover your annual tax obligations or do you would like to adjust? Conversely, chances are you’ll be paying too much or find that there are tax liabilities that will be deferred to next 12 months. In this case, you possibly can revise yours quarterly tax payments and unencumber money for business investments in the second half of the 12 months.
5. Do you pay enough attention to tax regulations?
Tax laws are continuously changing. Depending on the structure of your company and industry, chances are you’ll be entitled to more advantages than last 12 months or have to pay more for certain expenses. For example, in 2023, the rules on research and development costs for some firms modified. Technology firms are now forced to capitalize a greater percentage of these costs than ever before, which could have drastic tax consequences for venture-backed startups. They must now plan to allocate 30-35% of their income to taxes, which is able to subtract it from the amount that will be spent on the business.
To alleviate these problems, establish a good relationship with a tax expert. Schedule regular visits with your advisor so you possibly can review payments as needed, reallocate funds, and monitor tax law changes as they occur.
In the middle of the 12 months, it is often difficult to find time to assess your financial health. But now is the perfect time to review your budget, money flow and tax planning to make sure you are still meeting the goals you set for late 2023. Chances are good you will discover a recent perspective on your business and find a way to make key changes to survive the remainder of the 12 months.