Accavallo & Company, LLC

Midyear Financial Checkup: Ensuring Your Business’s Financial Health

As we approach the halfway mark of the year, it’s crucial to evaluate your company’s financial health through interim financial reporting. These midyear financial statements provide valuable insights, but it’s important to be aware of their limitations. Unless a CPA prepares them or performs agreed-upon procedures on specific accounts, these reports might not be as reliable as year-end financials.

Diagnostic Benefits of Interim Financial Reporting

Monthly, quarterly, and midyear financial reports are essential tools for identifying trends and potential weaknesses within your business. This midyear review is particularly vital if your company did not meet its financial goals in 2023.

For instance, you should compare year-to-date revenue for 2024 against the same period in 2023 or your annual budget for 2024. If your business isn’t growing or meeting its targets, it’s crucial to understand why. You might need to introduce additional sales incentives, launch a new marketing campaign, or adjust your pricing strategy.

Additionally, analyzing your gross margin [(revenue – cost of goods sold) ÷ revenue] can reveal if it has declined compared to 2023 or industry benchmarks. Identifying the cause of a slipping gross margin allows you to take corrective actions promptly.

Don’t overlook the balance sheet. Reviewing key asset and liability categories can help identify working capital issues before they become unmanageable. For example, a buildup of accounts receivable might indicate collection problems, or frequent reliance on your line of credit could suggest inadequate operational cash flow.

Proceed with Caution

If your interim financials appear irregular, there’s no need to panic. Such anomalies may not necessarily reflect issues in daily operations but could stem from informal accounting practices typical at midyear. Unlike year-end reports, interim financial statements for private companies are rarely subject to external audits or rigorous internal scrutiny.

Controllers might interpret period cutoffs loosely or rely on subjective estimates for account balances and expenses. Furthermore, interim reports often exclude significant year-end expenses like profit sharing and shareholder bonuses, which can create an overly optimistic picture of your company’s performance.

Physical inventory counts, which many companies perform only at year end, further complicate interim reports. As a result, interim inventory amounts may rely on computer schedules or estimates based on historical gross margins. Similarly, accounts receivable might be overstated if controllers haven’t had the time or resources to thoroughly evaluate potential bad debts.

Finish the Year Strong

With 2024 nearly half over, now is the time to leverage your midyear financial reports effectively. Once your team has prepared these reports, reach out to us for expert analysis and guidance. We can help you identify and rectify potential issues, and we can also address any shortcomings by performing additional testing procedures on your interim financials or preparing audited or reviewed midyear statements that adhere to U.S. Generally Accepted Accounting Principles (GAAP).

Contact us today to ensure your business is on track for a successful second half of the year. Our expertise can provide the clarity and support needed to finish 2024 strong.

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Sherri Fisher is a Tax Manager at Accavallo & Company, LLC.  Sherri has longstanding expertise in Trust and Estate Taxation, Eldercare, and Estate planning. Sherri appreciates the relationships she has built with estate planning attorneys and advisors, to provide a team approach to assisting her clients. Sherri also has seasoned experience in business and individual taxation and is partial to assisting start-ups in developing overall accounting and operating plans.

Prior to joining Accavallo & Company, LLC, Sherri was a manager in a large firm, servicing high net worth trust clients, business, and personal clients. She was also a Partner in a large bookkeeping firm, which specialized in cloud accounting systems for regional and national companies. Sherri led a team in assisting clients to organize their accounting systems.  She is a graduate of Florida Atlantic University with a B.S. degree in Accounting.    

Sherri’s experience includes working with companies and organizations in a variety of industries including:

  • Investment Trusts

  • DAPT and Family Investment Partnerships

  • Estate and Probate Administration

  • E-Commerce

  • Manufacturing

  • Construction

  • Real Estate Investment

  • Marketing and Service-based industries

In addition to her professional accomplishments, Sherri is an Intuit Advanced Pro Advisor, Intuit Future Firm Advisory Board member, member of the Valley WIN Network, and proudly served as past Connecticut Public School liaison for the Yale Tommy Fund for Childhood Cancer. Sherri enjoys time with her family, Cleveland sports, thrifting and gardening.