Heading into the end of the year, it's a good time for business owners to take stock of their business over the past year and strategize for the upcoming one. Use this year-end checklist to ensure your business is financially sound and legally compliant if this is your situation.
1. Review Your Financial Statements
You should review your balance sheet, income statement, and cash flow to see if your business is profitable and you are on target with your business goals. A balance sheet lists your assets and liabilities to determine your financial strength. An income statement (or profit and loss statement) shows if your business operates at a profit or loss. A cash flow statement shows how money comes in and out of your company. With accounting software, such as Quickbooks, you can reconcile your bank accounts and credit card statements and generate financial reports. Check your bookkeeping for any errors or discrepancies. Putting together these reports will also help with tax planning.
2. Prepare For Tax Season
You will want to gather all of the tax documents and information you will need to do your taxes. You may want to schedule a meeting with your accountant or CPA to make sure you are optimizing your tax situation. Ask the following questions:
- Am I missing any depreciation, tax deductions, tax credits, or eligible expenses to reduce my taxable income?
- Have I made all my estimated tax payments to the state and IRS?
- Are there any other strategies, such as deferring income or writing off accounts receivable, to reduce my tax liability?
- What statements do I need to issue (i.e., 1099s for independent contractors or W2s for employees)?
You may also want to discuss any other actions you can take for year-end tax preparation, reducing your tax bill, and organizing your business for the coming year. Doing this now will help when you file your business tax return.
3. Manage Inventory
If your business has inventory, it is critical to maintain accurate records. Conduct an inventory count of all items and reconcile the physical count with your records. Consult a tax professional about equipment or inventory write-offs.
4. Review Your Business Performance
Reflect on what went well and what challenged your business over the past year. You can compare Key Performance Indicators (KPIs) such as an increase in sales or number of customers and your profitability from the previous year. It may also be helpful to identify your business’s strengths, weaknesses, opportunities, and threats, called a SWOT analysis. And finally, you may want to reach out to your customers for their feedback about areas to improve.
- Do I need to cut back on business expenses or increase my pricing?
- Should I expand to new areas to meet the business needs of my customers?
- What is my competition doing? Can I do it better?
It is also important to set goals for the upcoming year, whether it is new customer acquisition, expanding business lines, or a new social campaign or marketing plan. You want to have goals to focus on to improve your business.
5. Double-Check Licenses and Contracts
Review your business licenses and permits to make sure you have all the appropriate permissions to operate your business.
- Do I have to renew any business licenses or permits?
- Do I have to file an annual report or pay a franchise tax or annual fee to the Secretary of State for my business entity?
- Do any contracts I have with vendors, suppliers, customers, or employees expire?
- Do I have to renew any software licenses or subscriptions?
Make a list of any due dates for license renewals or reports to avoid late fees or penalties. For license or zoning issues, you may want to consult a local business attorney for legal advice.
6. Check for Changes to Employment Laws
Verify with your state to see if there are any laws changing wages or employment requirements. There are 22 states with new minimum wage rates effective in 2026. This will affect employees in Alaska, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Maine, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York, Ohio, Oregon, Rhode Island, South Dakota, Vermont, Virginia, and Washington.
Additionally, determine if you must file 1099s for non-employee compensation. If you paid $600 or more to an individual or entity, you must issue a 1099.
In Conclusion
Small business owners should review their financial statements, prepare for tax season, manage inventory, and assess their business performance. It’s also crucial to double-check licenses and contracts and comply with any new employment or wage requirements.
With end-of-year business planning and review, you can avoid missing critical deadlines that may result in fees and penalties for non-compliance. You will also be in good shape for tax time and the next year ahead.
Related Resources
- Employment Law (FindLaw Learn About the Law)
- Business Tax Law (FindLaw Small Business Law)
- Small Business Tax Information FAQ (FindLaw Small Business Law)
