Half-year closing in SMEs: these key figures matter now

Why the half-year closing matters now

Under Swiss accounting law, the annual financial statements are central. They are meant to present the company’s economic position in a way that allows third parties to form a reliable judgment. The annual financial statements include at least the balance sheet, income statement and notes.^1,2,10

For exactly this reason, the half-year closing is not a formality for SMEs but an internal point for management. The SME Portal explicitly stresses that companies should prepare their income statement regularly to keep an eye on their performance.^1,2

The benefit lies in the timing: at mid-year, you still have enough time to adjust prices, costs, dunning, inventory, investments or payment terms. If you wait until the annual closing, many operational levers have already been used up.^3,4,5

A good half-year closing therefore answers more than the question of whether a profit was made. Above all, it shows whether your company is working profitably, whether too much capital is tied up in receivables or inventories and whether the current development fits the budget and the liquidity position.^3,4,5,6,7,8

These key figures matter now

At mid-year, you do not need a collection of key figures, but a few metrics with real decision value. For monitoring a company’s finances, the SME Portal names liquidity control, receivables control, inventory management and profitability as the central areas.⁷

1. Revenue development and cost structure

The income statement shows how income and expenses develop. What matters is not only revenue, but how cost of materials or goods, personnel expenses and other operating costs develop alongside it. Higher revenue is of little use if the operating margin shrinks at the same time.^2,4

For SME controlling, the variance against budget, prior year and annual target is therefore often more meaningful than the half-year figure on its own. According to the SME Portal, a realistic budget must be consistent and free of contradictions; this is exactly what you now measure your actual figures against.⁴

2. Operating result

The multi-step income statement helps to separate operating effects from neutral or extraordinary ones. For management decisions, the operating result is usually more important than the final profit, because it shows whether the core business actually carried the half-year.²

At mid-year, you should therefore deliberately separate one-off or prior-period effects from the operating development. Otherwise, you make decisions based on a result that says little about the second half of the year.^2,12

3. Cash flow

According to the SME Portal, cash flow is the best key figure for assessing a company’s financial strength and earning power. It shows whether the funds the company generates itself are sufficient to secure its existence in the long term.⁶

At mid-year, it is particularly relevant whether operating cash flow is still sufficient. The SME Portal states that cash flow must at least cover depreciation so that the substance of the company is preserved.⁶

In practice, this means for you: an acceptable half-year result in the accounts is not enough if too little money stays in the company at the same time to cover investments, repayments or seasonal burdens.^5,6

4. Liquidity

Liquidity ratio 1 shows current solvency and should be at least 20% of short-term debt. Liquidity ratio 2 sets available funds and short-term receivables against short-term liabilities and should be well above 100%.⁷

These key figures are useful, but not sufficient. The SME Portal explicitly points out that they only show an average degree of liquidity. Whether your short-term ability to pay is really secured only becomes visible with continuously updated liquidity planning.^5,7

5. Receivables and incoming payments

According to the SME Portal, liquidity depends decisively on how quickly invoices are issued and how punctually customers pay. That is why the development of receivables belongs in every half-year closing that is meant to support management.⁷

If revenue has risen in the first half of the year but receivables have risen even more, that is not a good sign. Your company may then be pre-financing its own growth, at the expense of liquidity.^5,7,11

6. Inventory and tied-up capital

The balance sheet shows where capital is tied up in the company. Current assets include, among other things, cash and cash equivalents, receivables and inventories. Inventories are therefore important at mid-year if your business model involves stock.⁸

The SME Portal explicitly names inventory management as an area to monitor. Rising stock levels can make sense, but they can also point to weaker sales, excessive purchasing volumes or too much tied-up capital.^7,8

Adjust the figures properly so they are reliable

A half-year closing is only as good as its data basis. According to the SME Portal, the accounting obligation covers in particular the inventory, a complete balance sheet and income statement; in addition, the relevant receipts must be available and retained.¹⁰

In practice, it is therefore not enough to simply print out a current trial balance. At mid-year, you need to check whether the figures are allocated to the correct period and are clean in substance.^2,10,12

You should adjust or deliberately check at least these points:^{2,8,9,10,11,12}

• expenses and income not yet recorded or incorrectly accrued
• open receivables and how collectible they really are
• open payables and accrued obligations
• inventories and their valuation
• depreciation on fixed assets
• provisions for identifiable risks

For provisions, the SME Portal names typical examples such as additional claims for AHV or VAT, warranty cases or litigation risks. Such issues distort the half-year view if they are known but not yet adequately reflected in the figures.⁹

The type of accounting also plays a role. The SME Portal points out that, depending on the size of the business, accounts receivable, accounts payable, payroll or fixed asset accounting can make sense. Where there are many invoices and payments, it explicitly recommends keeping accounts receivable and accounts payable ledgers.¹¹

You also need to keep valuation issues in view. In its valuation rules, the SME Portal emphasizes prudence in the balance sheet: a company should not be presented as wealthier than it is in economic terms. At mid-year in particular, this affects how meaningful individual balance sheet and income statement items are for internal decisions.¹²

Think about cash flow and liquidity together

The half-year closing answers the question of how things went. For managing the company, however, that is not enough. You need to derive an outlook for the second half of the year from it.^3,5,6

According to the SME Portal, the budget shows which expenses and income you expect over the year. Because costs and income often arise irregularly in reality, precise liquidity planning is also essential.^4,5

This is exactly where the half-year closing feeds into liquidity planning: weaker margins, slower incoming payments, higher inventory values or additional investments must be transferred directly into the cash flow forecast and short-term liquidity planning.^3,5,6,7

In practice, this means: you take the adjusted half-year figures, update the budget for the second half of the year and then check how these adjustments affect bank balances, payment dates and short-term reserves.^3,4,5