A mid-year review can help you stay on track
If you’re like most people, you made some resolutions back in January, like exercising or eating more vegetables. In the same way, many business owners make plans and budgets before the New Year starts.
As we move into the second half of the year, now is a good time to ask: Are my business results on track with my plan?
A mid-year checkup can help you find out. By scheduling an appointment with your business banker, you can also get ideas about changes you can make to keep your business finances on target.
Guessing vs. Knowing
The beginning of the year is a natural time to plan, but decisions made before January usually involve some guesswork. After the first six months go by, you know how the year is trending. Is business good enough that you need tools to help you save time? Or are you looking for ways to cut expenses instead? Either way, knowing is better than guessing.
Another advantage of a mid-year check-up is that your business and personal tax returns are available. The tax preparation process gathers a lot of useful financial information in a single place, and puts those numbers in perspective relative to past years.
Digging in
A mid-year financial review should cover a lot of ground. To enjoy the benefits you’ll need to put in some effort, yet your banker can help.
Financial service providers that are committed to serving small businesses have bankers who can “dig in” to your business statements and other documentation you provide. In doing so, they’ll gain a better understanding of your financial situation and can make suggestions for saving time and money.
Here are some key issues to evaluate when you sit down with your banker:
- Cash flow. If you’ve had to scramble to cover expenses, a line of credit could provide ready cash so other financial priorities aren’t put at risk.
- Business expenses. Take a look at everything you purchase and how you pay for it. This leads to expense control: how can you spend less, or be smarter about purchasing, and is there a credit option that makes sense based on how your business spends?
- Accounts receivable. On the revenue side, do you need to change your invoicing process to help bring money in sooner? You may want to consider offering more payment alternatives, such as signing up for merchant services, which will enable your business to accept credit and debit cards and receive customer payments more quickly.
- Planning a big purchase. If you need to make a major purchase for your business, talk with your banker about your options, including exploring financing and ways to make the most of your credit profile.
- Equipment financing. If your business depends on vehicles or equipment, it’s time to see if your needs have changed over the first half of the year. Check if your bank offers credit lines that you can use as needed for equipment purchases without reapplying later in the year.
- Online tools. There’s a wealth of tools for managing your business online – including online banking services that offer invoicing and bill pay. Are you making the most of them? Ask your banker what’s available.
- Other opportunities. With interest rates remaining at historically low levels, it might be time to take look at commercial real estate, new equipment or expansion opportunities. Does your business have needs in these areas that can be filled today?
Be prepared
With everything you need to get done on a daily basis, you could be tempted to skip a mid-year review with your banker. But it’s worth the time and can help you get organized. To make the review productive, gather the following items before you meet:
- Your most recent tax returns,
- Merchant card statements, if you have them, for the last three months,
- Vendor lists and purchase records,
- Account statements from other financial institutions.
Ask your banker if there are other business and personal financial statements that you should bring to the meeting.
Whether it’s your busiest time of year or your slow season when you start thinking about a summer vacation, July is the time to think about a financial review. With a few mid-year course corrections, you can help make sure your business is ready to reach its goals in the second half of 2012.
Coby Horton of Bend is Wells Fargo’s Business Banking manager for Central Oregon. He can be reached at (541) 633-1946.
