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 must present the economic position of the company in such a way that third parties can form a reliable judgment. The annual financial statements include at least the balance sheet, income statement and notes.^1,2,10

Precisely for that reason, the half-year closing for SMEs is not a formal end in itself, but an internal management milestone. The SME Portal explicitly emphasises that companies should prepare their income statement regularly in order to keep track of 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 exhausted.^3,4,5

A good half-year closing therefore does not only answer the question of whether a profit has been generated. Above all, it shows whether your company is operating profitably, whether too much capital is tied up in receivables or inventories and whether the current development matches the budget and 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 corporate finances, the SME Portal specifically names liquidity control, receivables control, inventory management and profitability as central areas.⁷

1. Revenue development and cost structure

The income statement shows how income and expenses are developing. What matters is not only revenue, but how material or cost of goods sold, personnel expenses and other operating costs develop alongside it. A revenue increase is of little use if the operating margin is shrinking 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 isolated half-year figure. 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 distinguish operating effects from neutral or extraordinary effects. For management decisions, the operating result is usually more important than the final profit because it shows whether the core business is actually delivering in the first half of the year.²

At mid-year, you should therefore consciously separate one-off or non-periodic effects from the operating development. Otherwise, you make decisions based on a result that is only of limited value for 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 internally generated funds are sufficient to secure the company’s existence in the long term.⁶

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

In practical terms, this means: an accounting result that appears acceptable at mid-year is not enough if too little cash remains in the business at the same time to support investments, repayments or seasonal burdens.^5,6

4. Liquidity

Liquidity ratio 1 shows current solvency and should amount to at least 20% in relation to short-term debt. Liquidity ratio 2 sets available funds and short-term receivables against short-term liabilities and should be clearly 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 short-term ability to pay is really secured only becomes visible through 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. For that reason, receivables development is an essential part of any half-year closing with management relevance.⁷

If revenue has increased in the first half of the year, but receivables have increased even more, this is not a good sign. In that case, your company may be 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, liquid funds, receivables and inventories. Inventories are therefore especially important at mid-year if your business model includes stockholding.⁸

The SME Portal explicitly names inventory management as a monitoring area. Rising inventory levels can be useful, but they can also indicate weaker sales, excessive purchasing volumes or too much tied-up capital.^7,8

Adjust the numbers correctly so they are reliable

A half-year closing is only as good as its data basis. According to the SME Portal, bookkeeping obligations include, in particular, inventory, a complete balance sheet and income statement; in addition, the relevant supporting documents must exist and be retained.¹⁰

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

At a minimum, you should adjust or consciously review these points:^{2,8,9,10,11,12}

• expenses and income not yet recorded or incorrectly accrued
• open receivables and their actual collectability
• 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 subsequent AHV or VAT claims, 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 bookkeeping also plays a role. The SME Portal points out that receivables, payables, payroll or fixed asset accounting may be useful depending on the size of the business. Where there are many invoices and payments, it expressly recommends maintaining receivables and payables accounting.¹¹

In addition, you must keep valuation issues in view. In its valuation rules, the SME Portal emphasises balance sheet prudence: a company should not be presented as wealthier than it is economically. Especially at mid-year, this affects how meaningful individual balance sheet and income statement items are for internal decisions.¹²