The January budget is an optimistic document. It is built on assumptions about revenue growth, hiring timelines, and market conditions that were reasonable in December and may be outdated by March. By July, most small businesses are operating with a material gap between what the budget said would happen and what actually did. That gap is not the problem. Failing to update your cash forecast to reflect it is. July is the natural checkpoint, mid-year for US businesses and post-EOFY for Australian ones. A structured review now prevents the second half of the year from catching you off guard.
What a Mid-Year Cash Flow Review Is Not
It is not a full audit. It is not a board presentation. It is a working review you do in a few hours. It answers a specific set of questions: Where is cash now relative to where the budget said it would be? What changed? What does the second half look like based on what is actually happening, not what was planned in January? And what decisions, if made in July, would materially improve the cash position in September or October?
The review does not need to be perfect. It needs to be honest about the gap between the plan and reality, and it needs to produce a refreshed 90-day forecast that you will actually use. If your current cash flow forecast is still the one your accountant built in February, it is not a forecast. It is a historical artifact.
The Six Checks to Run in July
| Check | What to Look At | What You Are Trying to Answer |
|---|---|---|
| 1. H1 Actual vs Budget | Revenue, gross margin, and operating cash flow for Jan-Jun against the plan | Are we ahead, behind, or on track? What drove the variance? |
| 2. Current Cash Position | Bank balances across all accounts today | What is the real starting point for H2? |
| 3. AR Aging Review | Outstanding invoices by aging bucket; DSO vs January baseline | Is cash collection getting faster or slower? What is at risk? |
| 4. Known H2 Obligations | Tax payments, loan repayments, lease renewals, insurance, any large capex | What fixed cash outflows are already committed for Aug-Dec? |
| 5. H2 Revenue Assumptions | Current pipeline, contracted revenue, seasonal patterns from prior years | What is a realistic H2 revenue range: base, upside, downside? |
| 6. Decisions Pending | Planned hires, equipment, marketing spend, new contracts, pricing changes | Which pending decisions need a cash flow scenario before committing? |
Run through all six. The output is not a polished report. It is a refreshed picture of where you actually stand and what you are planning to do in H2 based on real data.
How to Handle the Gap Between Budget and Reality
The H1 actual vs budget comparison will almost always show a variance. The goal is not to be disappointed by it. The goal is to understand it well enough to make better H2 decisions. There are three common patterns:
Revenue ahead, cash behind. This typically means collections have slowed relative to revenue growth. DSO has increased, or you have grown into a client segment that pays more slowly. Revenue growth is real; the cash is just delayed. The fix is collections acceleration and tighter terms on new business, not a revenue target revision.
Revenue behind, cash roughly on track. You did not grow as fast as planned, but you also did not spend as fast. The business is running leaner than budgeted. The H2 question is whether the revenue shortfall is a timing issue (delayed contracts) or a structural one (market conditions, pricing). The answer changes the forecast significantly.
Both revenue and cash behind budget. This is the scenario that requires the most immediate attention. If both are behind, the H2 budget needs to be revised down, not left in place as an aspiration. Operating against an unrealistic budget causes businesses to delay cost responses because the numbers “should” improve. They often do not improve on their own. Understanding the warning signs of a cash flow crisis starts with an honest assessment of where H1 actually landed.
Updating the H2 Forecast
After running the six checks, build a refreshed 90-day forecast from July to September. The forecast should use:
- Actual current cash balance as the starting point, not the budgeted balance.
- Realistic collection assumptions based on your H1 DSO and current AR aging, not the budgeted payment terms.
- Confirmed H2 fixed obligations mapped to their actual payment dates: tax due dates, loan repayment dates, lease payment dates. Not “approximately Q3” but the specific dates.
- Conservative revenue assumptions unless you have contracts or purchase orders that confirm otherwise. H2 revenue should be estimated at 80-90% of what you expect unless contracted revenue justifies higher confidence.
- Scenario variants for the decisions that are still pending. If you are planning a hire in August, run the forecast with and without it. If a major client contract is up for renewal, model both the retained and the lost scenario. Scenario planning at mid-year is significantly more useful than it was in January, because you are now modeling against actual H1 data rather than assumptions.
July 1 marks the start of a new financial year. Before updating the H2 forecast, confirm: (1) Q4 BAS lodgment and payment obligations, due July 28 for most quarterly reporters. (2) Superannuation for Q4. SGC must be paid by July 28. (3) PAYG withholding due dates for July. (4) Any income tax instalments due in the new year. These are fixed, date-specific obligations that belong in your July cash forecast before anything else goes in.
The businesses that finish the year with cash intact are not the ones with the most accurate January budgets. They are the ones that did the mid-year reset when it mattered, adjusted their plans to reflect what actually happened, and made their H2 decisions based on an honest forward view. For accountants who do this review with clients in July, it is also one of the highest-value conversations of the year. It is the moment where the advisory relationship is most visible.
Run Your Mid-Year Review Against Live Data
Finoya pulls your actual cash position, AR aging, and transaction data directly from QuickBooks or Xero. Instead of gathering data manually before you can start the review, you open the platform and the current state is already there. Connect your accounting file and see where you actually stand heading into H2.
Create your free Finoya account and run your mid-year cash review against real data in under 60 seconds.