A mid-year tune-up for your accounting firm's finances

Maintaining good financial health is an ongoing process, and the midpoint of the year is the perfect time to take stock. You can gauge what's gone well and what needs work while you still have time to make adjustments.

A careful review now of your business finances and practices can set you up for success in the coming months. Consider these key steps:

Review key financial reports

Just as you might advise a client to do, take time to review your year-to-date income statement, balance sheet and cash flow statement. Look for signs of potential trouble so that you can begin planning steps to correct course.

“Even if you know the value of reviewing your financial statements, carving out time to do so can give you valuable insight that helps to strengthen your firm’s financial footing for the rest of the year,” says Cathy Fisher, Business Banking Director at Citizens. “There may be things you’ve overlooked, and identifying them now could help you prevent them from becoming larger problems.”

Evaluate vendor spending

Check with your current vendors to be sure you’re getting the best pricing possible. Some organizations don’t take the time to investigate alternative options, incorrectly assuming that most vendor pricing is around the same. Reviewing your options can pay off — though keep in mind that it’s important to consider factors other than cost alone.

“While price is certainly important, value is really where you should place your focus,” says Fisher. “Non-monetary elements such as quality, service and communication should factor into your calculation.”

Always ask about promotions and price breaks you may be eligible for. Early-pay discounts are always a good way to save, if your cash flow allows you to take advantage of them.

Fine-tune your billing and collections practices

Re-evaluate how you pay bills, since making just a few adjustments could work to your advantage. For example, using online bill pay to schedule payments close to their due dates can let you hold on to cash longer, keeping it available for other purposes. Consider the payment methods you use — paying by credit card, for example, might help to protect your cash flow while letting you accumulate points that can be used for cash back, travel and other benefits.

Check the status of client payments and follow up on any that are overdue. For clients who are having difficulty paying, consider offering an alternative arrangement, such as allowing payments in installments.

Reinforce your reserves

Gauge your ability to weather unexpected dips in revenue or an unforeseen event. Generally speaking, reserves equal to three or six months of operating expenses can give you time to absorb an unforeseen expenditure or slowdown, though the exact amount you need will depend on your specific circumstances. Setting aside funds can be a challenge when there are more immediate priorities, and a line of credit is another option for managing cash shortfalls. You can tap the funds as needed and pay interest only on what you use.

Consider the services you offer

Carefully review the services you offer clients to understand how much revenue and profit each brings in. Think about whether making adjustments could help you improve these numbers and better meet client needs.

Speak with a handful of clients to better understand why they choose to work with your firm. Use what you learn from these conversations to determine whether you need to modify your offerings to meet market needs.

“Looking critically at your offerings can help you decide whether you should shift resources into areas with higher potential,” Fisher says. “Even if you can’t take action immediately, you might begin laying the groundwork for a change.”

Plan for upcoming needs

A mid-year review requires not only looking back, but also thinking ahead. Identify needs that will likely arise during the second half of the year so you can start planning for cost-effective ways to meet them.

For example, if you expect your staffing needs to increase, consider whether you need full-time employees or could work with independent contractors instead. Crafting your business strategy early on will help you approach these situations in a way that will save you money in the long run.

What to remember

Don’t wait until the end of your fiscal year to take stock of the financial health of your firm. Give yourself a midyear assessment and be able to use the second half of the year to make any adjustments necessary. And, whether you need help gauging the financial health of your firm or tools and guidance to improve it, it will give you time to find the financial solution to meet your needs and objectives.

More information

Learn more about how we can help your firm reach its potential. Our dedicated business banking professionals can help you find the right product to meet your business’ needs. Please call 1-800-428-7463, or stop by your nearest Citizens branch.