So, take some time to review your income and expenditure over the first six months of the year to see if your firm’s finances are where you expected them to be.
What were your goals at the start of the year? Have these been achieved? If not, what has caused this and will the situation affect the financial performance of your company over the rest of the year?
Look through the purchase ledger and see if there are any costs that are well over budget. Can you cut these costs? Is there a build up of stock which means you can cut down on purchasing costs for the next few months?
Were your sales targets reached in the first six months? If not, then review your sales departments to see which areas are below target and work out how you can improve on this in the second half of the year.
Did you receive other types of income such as receipts from investment or rental property? If so, was this income budgeted for in your cashflow and will it become recurring income? If so, ensure it is in your future cashflow statements and budget.
Have events led to a change in your financial goals?
If circumstances have changed it might mean you need to change your financial goals. When producing your financial targets at the start of the year, some events that have occurred since may not have been forecast.
This could include a change in commercial conditions, the introduction of a business rival or higher production costs.
This may require a firm to adjust their budget and subsequently their financial goals to more realistic targets.
Do the changes mean you need to save or earn more money?
Depending on what the impact has been from unforeseen events, your business may need to either earn more revenue from extra sales or make savings within the business to achieve your financial goals by the end of the year.
Be specific and realistic – set specific targets that are realistic
If you need to raise extra funds, it may be sensible to try and find extra funds from both sales and purchases.
This is because sales targets have yet to be turned into actual income. Therefore, it makes sense to identify customers where there is realistic scope for increasing sales and focus on those specific customers.
Equally, by taking a close look at the costs of the business, you should be able to identify cheaper alternative suppliers or specific areas where you can cut back without affecting the performance of the business.
Write a detailed plan
Now you understand what you need to do, now is the time to write a detailed plan on how to utilise your finances to reach your goals.
Put together a plan on how to increase sales and keep costs down and update your cashflow statement accordingly to show the new estimates of income and expenditure for the rest of the year.
Allow for flexibility
In case of unexpected events, it is a good idea to allow a small margin of flexibility to both revenue and expenditure for events or figures that are difficult to judge with a high degree of certainty.
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