Too many business owners wait to evaluate their operating and financial results until the after the year is over. I was often hired as a contract CFO when the business owner finally realized that many changes or course corrections needed to occur throughout the year. I find organizations that have advisory boards understand the need for reviewing results more frequently than once a year and in fact generally do so at every meeting.
Here are ten questions to consider when doing a mid-year or more frequent review:
- What’s keeping the CEO up at night? Do the financial results support the lack of sleep or is he worrying needlessly? Alternatively, what should he be worrying about?
- Where is the current year revenue level compared to the budget and last year? What’s in store for the next six months, higher or lower? This is important to know as it impacts expense levels and capital spending.
- Where are the current year expense levels compared to budget and last year? Have there been any surprises? What’s anticipated for the second half of the year?
- What are the hiring plans? Is the present staffing level sufficient to manage any upswing in the business now that recovery has started? Can this be done without burning out current staff that may already be overworked? What are the signs more staff is needed?
- What are the plans for purchasing equipment and facility upgrades? Does the company need to own or would they considered leasing?
- What needs to be changed in the marketing plan based on the results for the first half? How will changes impact expense levels?
- What do the accounts receivable and payable aging reports look like? How are customers paying? How are vendors being paid? How old are the oldest receivables? The older they get, the harder they are to collect.
- Will there be any bonus payout? About mid-year employees start to think about and even inquire about their bonus. Will the payout be delayed in order to preserve cash? What will be the message to those employees who will be affected? After all it could be the second or third year of no bonus and perhaps no wage increase.
- How are you taking advantage of the recovery? Are you developing new products or services? What are your competitors doing?
- Lastly, what gets you up in the morning about your business? Where is the excitement and enjoyment? If there isn’t much of either, perhaps it’s time to reevaluate what you are doing.
Many of us have ventured into very different and sometimes new territory as a result of the recession. The guides we previously relied upon may no longer exist. The only way to develop new ones is to take an active approach to reviewing your operating and financial results. Don’t wait…do it now!
