You’re halfway through the year. Before July arrives and the second half accelerates, there are five things worth looking at directly — not delegating to your bookkeeper, not waiting for your accountant to bring them up. You, looking at actual numbers.
These are the five we review with every client between May and July.
1. Gross profit margin year-to-date vs. same period last year
Revenue minus cost of goods sold (or direct cost of services), divided by revenue. That’s your gross margin.
If it dropped year-over-year, you either raised costs without raising prices, or your pricing hasn’t kept up with what it costs to deliver your service. Both are fixable. Neither gets easier to fix in the second half of the year.
If it improved, figure out what drove it — so you can protect it.
2. Your estimated full-year tax liability
This is not a guess. It’s a projection: take your year-to-date taxable income, annualize it, apply your effective rate, adjust for any planned changes in the second half. The output is a number. Compare it to what you’ve paid in estimated payments.
If there’s a gap, close it in Q3. Waiting until Q4 — or April — is expensive.
3. Owner’s compensation structure
If you’re an S-Corp, your W-2 salary and total distributions should be reviewed at the mid-year point. The IRS looks for S-Corp owners who take all their income as distributions to avoid payroll taxes. “Reasonable compensation” is not whatever’s convenient — it has case law behind it.
If you haven’t set a W-2 salary that reflects what you’d pay someone else to do what you do, mid-year is the time to adjust it before year-end payroll becomes a problem.
4. Accounts receivable aging
Run your AR aging report. How much is current? How much is 30–60 days past due? How much is over 90 days?
Anything over 90 days has a meaningful probability of becoming a write-off. You should either be aggressively collecting those balances or deciding whether to pursue them. Letting them sit is not a strategy — it’s avoidance.
5. Cash flow trend: are you building or burning?
Revenue is not cash. Profit is not cash. The question is: over the last 90 days, has your bank balance been trending up or down after accounting for normal operating cycles?
A business can be profitable on paper and cash-strapped in reality. This happens when receivables are slow, payables are tight, or debt service is consuming margin. If your bank balance is going the wrong direction despite a profitable P&L, you need to understand why — and soon.
These five numbers aren’t a comprehensive financial review. They’re the five things that, if something were significantly wrong, would tell you. Pull them before July. If any of them don’t look right, that’s the conversation to have now.
