Conduct a Mid-year Audit

Assess finances and business strategies as you plan for the second half of the year.

Halfway through the year is a great time to assess finances and business strategies as you plan for the second half of the year.

“A complete audit prepares the company for accurate performance forecasting and achieving those results based on what is learned from the audit,” explains consultant Ed Kovalchik of Net Profit Inc.  

Numbers to watch

There are many metrics to be tracked throughout the year and during a mid-year audit. Be sure these numbers check out with your accountant's records as well.

“Businesses should track revenue, gross margins and the cost of goods sold—commonly called COGS, which are expenses directly related to the production of a product or service,” says Mike Horak, president of the Outdoor Products Group within GE Capital’s Commercial Distribution Finance business.  

Kovalchick says the most important value to watch is gross profit margins. Calculate, manage and forecast every margin. “Accurate accounting of each margin is vital to attaining profit targets,” says Kovalchick. “Department gross profit levels determine the all-important budgets, not vice versa.”

The Green Industry cycle

For equipment dealers and contractors, operating in an industry that sees the bulk of its revenue in the beginning of the year means the need for careful auditing, planning and saving.

“When incoming revenues change sharply over predictive periods, that statistic creates significant issues which have to be planned for well in advance,” says Kovalchick. “Both saving and minimizing inventory levels has to begin in the very first part of known high-volume periods.”

Work with your accountant to develop a plan for cash that ensures the business endures low-income periods. If you find yourself past that savings point with sales and profit lower than expected, Kovalchick suggests letting up on margins a bit and reaching out to customers to push goods and services.

“Utilize the customer contact list to make person-to-person calls to present the ‘great deals’ available for a limited time,” advises Kovalchick. “General media advertising gains nominal results in the non-market periods, but going directly to known customers still yields results. There is always a need when the price is right.”