The short answer
A mid-year financial review is a structured look at your HVAC company's numbers at the halfway point of the year, while there is still time to fix what is not working. By the end of July you have six months of real data and a busy summer fresh in the rearview. Checking seven things now, profit margin, cash position, AR, job costing, payroll, tax set-aside, and your forecast, lets you walk into the fourth quarter and tax season with a plan instead of a surprise.
Key takeaways
- July is the ideal time to course-correct, because you still have a full quarter to act on what you find.
- The goal is to catch problems while they are cheap to fix.
- Six months of clean data is enough to see real trends.
- A mid-year review is to your business what a check of vitals is to a patient. Quick, routine, and it catches the thing that would have hurt you.
Why do a mid-year review at all?
Most contractors look hard at their numbers once a year, at tax time, when it is far too late to change anything. By then the year is written. A mid-year check-up moves that look forward six months, to the point where you can still raise a price, fix a leaking job type, or set aside more for taxes before the bill lands.
Think of it the way a paramedic checks vitals. You are not waiting for the patient to code. You are taking a fast, honest read so you can act early. Same idea, applied to your books.
Here are the seven things to check before the fourth quarter.
The 7-point mid-year check-up
1. Profit margin: are you keeping enough?
Pull your gross and net profit margin for the first six months. Compare them to last year and to where you wanted to be. If margin slipped, you have time to find out why, pricing, labor, or overhead, and fix it before Q4. This is the single most important number on the list.
2. Cash position: how much runway do you have?
Look at your cash on hand and your trend over the last six months. Summer is your high-cash season, so if your balance is thin now, winter will be tighter. Know your number before the slow months arrive.
3. Accounts receivable: who still owes you?
Run an AR aging report. Anything sitting past 60 or 90 days is money you earned and have not collected, and the older it gets, the harder it is to recover. Mid-year is a good time to chase the stragglers from your busy spring and summer.
4. Job costing: which work actually paid?
Review your job costing for the first half of the year. Which job types carried strong margins. Which ones looked busy but barely paid. This is where you decide what to chase and what to price differently in the back half.
5. Payroll: is labor in line with revenue?
Check labor as a percentage of revenue. If it crept up over the busy season, find out whether it was overtime, unbilled time, or pricing that did not cover the burdened rate. Labor is your biggest cost, so a small correction here moves real money.
6. Tax set-aside: are you ready for the bill?
Confirm you have actually been setting aside money for income and self-employment taxes, and that your sales tax collected is separated from your operating cash. If you are behind, July is far better than April to find out and catch up.
7. Forecast: what does the rest of the year look like?
Build or refresh a forecast for the back half of the year, with a base, best, and worst case. Use what the first six months told you. A forecast turns the unknown fourth quarter into something you can plan trucks, hires, and cash around.
A simple mid-year scorecard
| # | Check | Healthy sign |
|---|---|---|
| 1 | Profit margin | At or above target, steady or improving |
| 2 | Cash position | Growing through summer, with a reserve |
| 3 | Accounts receivable | Little aged past 60 days |
| 4 | Job costing | You know your best and worst job types |
| 5 | Payroll | Labor percentage in line with plan |
| 6 | Tax set-aside | Money is actually set aside, not spent |
| 7 | Forecast | A base, best, and worst case exists |
If you can check off all seven, you are running a real business with its eyes open. If several are blank, that is not a failure. It is a to-do list with five months left on the clock.
Frequently asked questions
When should an HVAC contractor do a mid-year financial review?
The end of July is ideal. You have six months of data plus the busy summer fresh in mind, and a full quarter remains to act on what you find before year end.
What financials should I review at mid-year?
Profit margin, cash position, accounts receivable, job costing, payroll as a percentage of revenue, your tax set-aside, and a forecast for the rest of the year.
How is a mid-year review different from a tax-time review?
A tax-time review looks backward at a year you can no longer change. A mid-year review looks at the same numbers while you still have time to fix pricing, collections, and cash before the year closes.
Do I need an accountant for a mid-year review?
You need clean books and someone who can read them in plain English. A bookkeeper who knows the trades can run this with you and flag what needs attention.
Get a clear read before Q4
Jeremy Brewer is the founder of 911 Bookkeepers LLC in Baton Rouge, Louisiana. He spent years in the field as an HVAC tech and works as a licensed paramedic in EMS. He is a Xero Certified Advisor. 911 Bookkeepers is built for the trades: rescuing your books one call at a time.
Related posts in this series: Revenue vs. Profit · Why HVAC Contractors Run Out of Cash in Summer · HVAC Bookkeeping: The 12 Numbers
Comments
Post a Comment