Why Your Mid-Year Budget Review is Absolutely Essential

A Mid-Year Budget Review Will Set a Better Route

Based on our website analytics, the device you are currently using to read this article probably has some kind of global positioning capability. Whether it uses an internet connection or GPS tracking, modern computers and cell phones allow us to instantly find directions to any destination we want. 

When this kind of technology became available, consumers adopted it rapidly. It turns out people really like knowing how to get places!

Apps like Waze and Google Maps are so popular because they offer up-to-the-minute information through an easy-to-use interface. Critically, they help people choose a destination and set the best course available with current traffic and weather data. In the same way, budgets with up-to-date information show business operators their best path forward to reach their goals. 

You wouldn’t rely on an out-of-date map to reach your destination. So why would you look at an out-of-date budget? Your business expenses are subject to regular fluctuations. Your income may underperform or outpace expectations. That’s why I work with clients on vital mid-year budget reviews. We use the most recent trended performance data available to update projections and refresh budget priorities.

Why can’t we just stick to the plan?

Good plans and budgets can adapt as circumstances change. Your budget’s ability to adapt depends on the quality of your data. The more accurate and thorough that data is, the more predictive and useful your budget becomes. 

We use historical revenue data to help business owners gain perspective on their expected cash flow. Estimated costs for material, fuel, utilities, labor, taxes and more help operators understand their budget limitations and how much money will be available for less essential purchases. Together, these informed expectations create the substance of a useful annual budget.

However, throughout any fiscal year, the relevant data changes. When costs rise or fall rapidly, it can undermine the assumptions upon which your budget was written. A mid-year budget review allows you to correct the underlying data and set new, achievable goals. Your projections may not change at all or they may change dramatically. In either case, you will be able to place more confidence in your updated budget.

In late July–early August, most businesses have reached the first half of their fiscal year. At this point, they have gathered enough data to make significant corrections to their forecasts and budgets. This kind of “forecast update” is not as intensive or time-consuming as an annual budgeting session. We use 6-7 months of this year’s trended history to make needed adjustments to clients’ plans for the remaining 5 months. 

A mid-year budget review will make you more agile and sure-footed with operational, strategic, hiring, and purchasing decisions. These types of forecast updates are also incredibly useful for tax prep professionals. When tax accountants have more of the data they need to file, they are able to spend more valuable time on planning.

Going Further to Improve Your Budgets

Advantage Insights’ Progressive Growth and Advanced Performance clients gain access to thorough mid-year budget reviews in addition to monthly status updates. But that is only the beginning of how we help clients create effective budgets.

In addition to mid-year budget reviews, I have helped clients employ rule-based budgeting that can change monthly based on actual business performance and other variables. Rule-based budgets can automatically update according to pre-programmed triggers.

Budgets that automatically adjust based on preset formulas provide a plan and budget for any of a range of outcomes. Advantage Insights can even provide built-in forecast scenarios that can be toggled on and off so you can be prepared for whatever the next year might hold in store.

We use a virtual tool for financial forecasting called Fathom, a software that integrates with QuickBooks. Fathom can draw data from budgets and QuickBooks to offer forecasting insights that range from simple to sophisticated. This helps us meet clients where they are in regard to their financial literacy. We slowly introduce more concepts that enrich planning and financial awareness in a way that is easy to understand.

Sound Budgets Help Businesses Reach the Next Level

I have seen it over and over again. When businesses adopt better accounting and budgeting practices, it unlocks greater potential for performance, growth and peace of mind. I’ve watched businesses double their revenues and profits simply because they were able to see and pursue growth opportunities that emerged from the data.

These businesses are able to optimize their pricing, make better purchasing decisions, and employ more effective marketing strategies—all because they are able to set a better course based on fresh information. 

Nevertheless, some business owners remain disengaged from their budgets. For some, the practice doesn’t seem worth a regular time commitment because of how unpredictable their business seems. However, thorough financial reporting and analysis can actually reveal new ways to predict and prepare for otherwise unforeseen circumstances.

When a business owner can review their performance data in a way that makes sense, the value of these budgeting practices becomes clear. We meet with clients monthly to review financial performance and answer any questions they may have. Simply put, we offer thorough, customized financial reporting as well as constant support so our clients can actually understand and get excited about their new level of financial awareness.

If you want to learn more about mid-year budget reviews and other essential financial management practices, Advantage Insights can answer your questions. We work with clients to understand their challenges and their goals. Working together, we can design a program that will help you achieve those goals.

Click here to get the conversation started with a free consultation.

sign up for your free consultation

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.