Have you recently received your Mid-Year financial report, and maybe you are unsure of everything you are looking at? If you have not received one and you would like to, your bookkeeper can provide excellent mid-year financial reports for your review. These Mid-Year Financial Reports are rich with information about your business. These reports will allow you to loosely project your year-end balance and compare year-to-year performance.
Below are some questions that may be asked by savvy business owners while reviewing their Mid-Year Financial Reports, as well as some insight to what the answers may mean for you.
- Any new General Ledger lines this year?
- It’s important to pay attention to new expenses for small businesses. Sometimes business owners are caught by surprise as new costs crop up. An efficient P&L is short and sweet, with minimal changes year-to-year.
- Am I over-drawing my Owner-Draw/Member-Distributions account?
- For Owners or Equity-Members of companies, make sure that you do not draw out more than your company’s net profit (over-drawn distributions).
- For example: If your company is operating at a Net-Profit of $10,000 for Jan-Jun, but you’ve drawn out $20,000 in Member-Distributions, that means it’s likely time to STOP distributions, so that hopefully by year-end, you are not over-drawn.
- Conversely, if your company is operating at a Net Profit of $100,000 for Jan-June, but you’ve only drawn out $15,000 then it may be time to look at drawing more out, or even (more wisely) using your Distribution to make Estimated Tax Payments directly to the IRS against your projected year-end income tax burden.
- Is my Shareholder Salary still in-line as expected?
- If your P&L bottom line is 25% higher or lower than the previous year, then you may need to look at raising or lowering your Salary. Reach out to your bookkeeper to ask about this if you are concerned.
- Should I let my CPA or Tax Planner know how our books are doing?
- If your overall profits have changed by 25% over/under the previous year, it may be in your best interest to let your CPA know, as they may be able to help you with optimizing your tax situation before year-end.
- If there have been any changes to the Equity accounts (buy-ins, new shareholders) or Asset accounts (property purchases, new buildings) then you might want to chat with your CPA to ensure you are making the necessary adjustments to your Estimated Tax payments, and that you are collecting the appropriate documentation.
- Have I started working in a new State?
- It’s a good idea to take a moment at mid-year to look at that P&L top Income line and consider whether you may have any Out-of-State sales or work, either currently happening or coming up. Identifying tax/job presence in other States is crucial well-ahead of year-end so that your bookkeeper can ensure that you are properly set up in those States for tax-reporting as necessary.
- Vendor W9s Listing – up to date?
- Staying up to date on collection of W9s for all new Vendors that you work with is critical. This helps avoid a big year-end rush to gather documentation for 1099-processing. Let your bookkeeper know if you have new vendors, you will be working with!
- For Owners or Equity-Members of companies, make sure that you do not draw out more than your company’s net profit (over-drawn distributions).
Your bookkeeper works hard to provide these valuable reports to you and wants to ensure you understand everything being reported. Clear Mid-Year Financial Reports allow you to be an informed and effective business owner, and to work effectively with your CPA. If you would like to chat with us further to understand your reports better, feel free to reach out to us!