By the midyear mark, businesses have six months of information to dictate where they need to reallocate resources and take corrective measures that will mitigate the impact of inefficiencies or ineffectiveness in the business during the second half of the year.
This is according to Jeremy Lang, Regional General Manager at Business Partners Limited (BUSINESS/PARTNERS). He says that in order to build strengths and eliminate weaknesses, business owners should ask themselves the following seven questions as the basis of a midyear review:
1. Are the business’s financial results reflective of the budget prepared at the beginning of the year?
The strength of a business rests on its financial results and financial position which is reflected in the income statement, balance sheet and cashflow statement, so starting off by looking at the midyear results gives a good indication of the overall health of the business, explains Lang. “It is essential to investigate any material variances between actual results and budget and to put corrective measures in place where necessary. The impact of abnormal or once-off events on the business should also be considered,” he notes.
2. How have departments and staff been performing?
The feedback from individual midyear performance reviews provide valuable insight that should be considered as part of the overall midyear business review. “All businesses should have formalised performance measures and performance review processes. Once performance reviews have been completed, it is essential to reward good performance to avoid a midyear slump in morale, while putting the necessary measures in place to improve bad performance.”
3. What impact has the external operating environment had on the business?
“Business owners have to ask themselves if they are still operating in the same environment that they were at the start of the year, and if not, they need to identify what they have to change in order to adapt to the current environment,” Lang says. He advises that business owners scout the environment – including global economic growth rates, general business confidence, exchange rates, interest rates, fuel cost drops and hikes, as well as events like national elections – and evaluate whether the current environment has changed compared to the assumptions that were made when the annual budget was drawn up.
4. Which customers have been lost and gained?
The midyear mark is a great time to relook at the business’s customer retention and attraction strategy to make sure projected figures are on track for the end of the year. “Business owners should look at which customers they have lost and understand why,” says Lang. “In addition, they should also look at customers who have moved over from competitors and develop insight around this.”
5. Are there any new or alternative suppliers available?
Lang recommends that business owners evaluate suppliers in terms of their pricing, quality and service of their product. “If better alternatives are available, businesses should carefully start the process of moving part their procurement over to these service providers.”
6. Is the business operating optimally?
At the midyear mark businesses should identify sources of inefficiencies and bottlenecks and look at innovative solutions to these problems. The theme of innovation should run throughout the business, says Lang, and shouldn’t just focus on products, but also extend to the production process, administration as well as all other departments.
7. Should budget adjustments be made?
Finally, Lang says that businesses should make the necessary budget adjustments for assumptions that were incorrect or inadequate. “This includes assessing the liquidity position and working capital finance needed to achieve business objectives. If the business has exceeded its growth expectations, then it may be necessary to rework the working capital finance needs and to put those facilities in place.”
While a midyear review may not set the pace for a business strategy, it is instrumental in allowing a business to identify problems with systems, processes and employees, and to set up corrective measures. “Conducting a midyear review brings about a renewed sense of focus, attention and action. A holistic understanding of where a business finds itself at the midyear mark, is vital to stay on the correct track moving forward,” Lang concludes.
