The halfway point of 2025 is a great time to take stock of the financial performance of your business. Just as you wouldn’t skip your regular check up at the doctors, your SME deserves the same attention to its financial health. A review in the middle of the year can reveal important insights that can help you correct your course before the end of the year, setting up your business for better performance in future months ahead.
Why timing matters
Q2 ends in June which makes it a great checkpoint to assess your business. There’s 6 months of data to look at, but there’s also a lot of time to put changes into place to significantly impact your end-of-year results. This applies whether you’re on target or facing unexpected issues – understanding your position gives you target power to make the right decisions rather than being reactive closer to December.
Key areas to review
Budget vs. actual performance:
Start by comparing your year-to-date performance against your original budget. Are revenues tracking as expected? Have certain expense categories ballooned beyond projections? This comparison often reveals patterns – perhaps seasonal fluctuations you hadn’t anticipated or cost creep in specific areas. Don’t just look at the numbers; understand the story behind any variances.
Cash flow analysis:
Cash remains king for SMEs. Review your cash flow patterns over the past six months. Are customers paying on time? Has your cash conversion cycle lengthened? Identifying cash flow bottlenecks now allows you to address them before they become critical issues. Consider whether you need to tighten credit terms or chase outstanding invoices more aggressively.
Tax position assessment:
Mid-year is crucial for tax planning. Calculate your estimated tax liability based on current performance. If you’re doing better than expected, you might need to increase your payment on account to avoid interest charges. Conversely, if profits are lower, you could potentially reduce payments and improve cash flow. Don’t forget about VAT obligations and any upcoming PAYE deadlines.
Updated forecasting:
Armed with six months of real data, update your forecasts for the remainder of the year. This isn’t about abandoning your original goals but rather creating realistic projections based on actual performance and market conditions. Consider different scenarios – what happens if that major contract comes through? What if economic conditions tighten?
Making data work for you
SMEs that are the most successful don’t just review numbers annually. These businesses keep a close eye on their financial health throughout the year. Monthly management accounts convert raw data into useful insights which allows you to see trends earlier – allowing you to make proactive decisions. If your gross margins are exhibiting a downward trend each month, you can investigate and address problems before they impact profitability in any significant way.
Taking action
You can create a prioritised action plan once you’ve completed your review…Maybe you’ll need to focus on collecting debt, or perhaps you’ll need to renegotiate terms with a supplier or increase efforts in your marketing to boost revenues in the second half of the year. The key is translating insights into concrete steps with assigned responsibilities and deadlines.
Professional support makes the difference
While many SME owners handle basic bookkeeping, a comprehensive financial health check benefits from professional expertise. Experienced accountants spot issues and opportunities that might escape the untrained eye. They can also ensure you’re maximising tax efficiency and maintaining compliance while you focus on running your business.
How Velocity can help
At Velocity, we specialise in providing SMEs with the monthly management accounts and strategic insights needed to thrive. Our tech-driven approach means you get real-time visibility into your financial performance, not just historical reports.
Don’t wait until year-end to discover financial surprises. Take control with a mid-year financial health check. Contact Velocity today to discuss how our monthly management accounts service can keep your business financially fit throughout the year.
