Mission Driven Business How To Do A Mid-Year Money Check
Brian Thompson returns for a solo episode packed with practical advice to help entrepreneurs take charge of their numbers. In this mini masterclass, you'll learn how to use your profit and loss, balance sheet, and reconciliation reports more effectively. Whether you love or loathe spreadsheets, this episode gives you the tools to pause, reflect, and make strategic financial decisions to set yourself up for success in the second half of the year.
How To Conduct A Mid-Year Financial Review 1. Reconcile and clean up your booksFirst, set aside at least 90 minutes to focus without distractions. Before analyzing anything, make sure your books are clean:
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Start with reconciliation: Check that your accounting software matches your actual bank transactions and credit card balances.
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Review your categories: Go through your chart of accounts to ensure expenses are correctly categorized.
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Review your balance sheet: Ensure your cash balances, accounts receivable, accounts payable, and other liabilities align with what you expect. If not, dig deeper to understand why.
Run a profit and loss (P&L) report for the period from January through June and analyze the data:
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Analyze your revenue: Compare your actual revenue to your goals and prior years. If you offer multiple types of service, break down which ones are driving your revenue and which ones may be underperforming.
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Analyze your expenses: Look for surprises, categories that you are over budget in, and for subscriptions or tools you no longer use.
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Calculate your gross and net profit: Ensure you are maintaining healthy margins, and if margins are shrinking, find out why.
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Look for trends: When looking at the big picture, make sure all the pieces fit together. For instance, if you're spending more on marketing as an expense, you'd expect to have a corresponding higher revenue.
Cash flow is not just about what you earn -- it's also about what you keep. Use the following steps to make sure cash is flowing into and out of your business strategically:
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Check your bucket allocations: If you use the bucket system, ensure you are still transferring funds consistently to your various business accounts and that your percentages are still realistic based on current revenue.
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Review your operating cash flow: Ensure cash is coming in faster than it's going out and that you aren't relying too heavily on credit to cover gaps.
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Check your accounts receivable: This step is one of the easiest ways to increase your cash flow quickly by following up on outstanding invoices and consistently enforcing your payment terms.
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Evaluate large expenses: Consider whether you should delay or accelerate spending based on your cash position.
Once you understand your numbers in detail, it's time to turn your insights into action:
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Set or reset financial goals: Use your findings to update your targets for the second half of the year. Make sure your goals are specific, measurable, and tied to your broader vision.
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Identify quick wins: Look for easy adjustments that make a big difference. Small changes now can have a significant impact on your year-end results.
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Improve your systems: Make a plan to fix systems that aren't working. Good systems reduce mental load and improve accuracy.
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Communicate with stakeholders: Share your findings with your team, financial advisor, or coach.
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Reflect and celebrate: Take a moment to reflect on what is working, and celebrate the fact that you're engaging in this process.
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Brian Thompson, JD/CFP, is a tax attorney and Certified Financial Planner® who specializes in providing comprehensive financial planning to LGBTQ+ entrepreneurs who run mission-driven businesses. The Mission Driven Business podcast was born out of his passion for helping social entrepreneurs create businesses with purpose and profit.
On the podcast, Brian talks with diverse entrepreneurs and the people who support them. Listeners hear stories of experiences, strength, and hope and get practical advice to help them build businesses that might just change the world, too.