By Shelley Kessler, Senior Manager, Business Advisory Group

It’s no doubt managing your budget can be a challenge with today’s unpredictable market conditions and continuous changes in legislation impacting businesses across the globe. With the midyear of 2022 quickly approaching, it’s a great to time perform a budget checkup to help evaluate how your business is performing and determine whether any adjustments should be made to ensure a successful year-end.

Consider these key areas of your budget when conducting a midyear review: 

  • How are your year-to-date expenses and revenue aligning with your initial projections? Supply chain issues continue to be a primary pain point for many business owners, making managing expenses a challenge. Businesses have vendors who will currently not honor any price lists due to prices changing so quickly, leaving an unclear understanding as to how much supplies cost until they’re delivered to their facility.
    • A midyear budget review can help business owners gain a true understanding of how supply chain issues and associated costs have impacted the organization’s actual expenses and revenues. With this information, you’ll have a much better idea what to expect in the coming months and develop the necessary action items to meet future projections.
  • What is your cash flow situation? Many businesses have been experiencing significant cash flow shortages due to cost fluctuations in supplies, and in some cases, slow-paying customers. Consider performing a cash flow analysis to help detect if there are any collection issues or whether you should revisit some of your vendor relations. Once you’ve reviewed key areas such as actual costs of your inventory or supplies, vendor payments and collections from customers, it will help you make the appropriate adjustments. A few cash-flow strategies to help shorten your cash cycle and free some up include negotiating your contracts or payment terms with your vendors, assessing your process for managing inventory, establishing a credit policy for your customers, having your team stay on top of collections as well as implementing a system for cash management. 
  • Are there any adjustments you should consider from a tax perspective? Midyear is the perfect opportunity to assess your tax situation with your business tax advisor. A few areas to evaluate from a tax perspective include whether there have been any recent changes in tax laws, plans for capital expenditures and tracking your quarterly tax payments to see if any adjustments should be made. Your quarterly payments are often based on your previous year’s business activity, and with economic conditions changing so drastically right now, it’s a great time to review these payments rather than wait until the year-end when you usually do. 
  • Have you assessed your current staff levels? This piece is often forgotten when it comes to budgeting and can make a huge impact in meeting your projections. Once you’ve assessed your budget and estimated costs for future work, you’ll be able to determine your resources and staffing needs and at what level. Plus, if your budget review falls within the same timeframe as employee evaluations, it would also be the most ideal time to make any workforce-type decisions. 

As companies continue to navigate supply chain issues, it’s important to have reliable financial data and a strong management team to help keep your business running smoothly. To obtain assistance with your budget review, contact Doeren Mayhew’s Business Advisory Group today.