As a very challenging year for business owners comes to an end, it’s important to take a clear look at your overall financial health. Do you have the funding necessary to help your business post-holidays?
Here are some questions to ask yourself to ensure your success moving into the new economic normal.
What’s important about year-end finances?
The past few years have brought about rapid shifts in consumer habits (greater demand for online services and increased focus on convenience) and operational expenses (staffing shortages, supply chain delays and increased compliance requirements). These changes make it imperative to take a close look at your company's financial foundation before the new year rolls around.
Your ability to stay stable and adapt to market changes is crucial to keeping your business afloat. You must be able to spot fluctuations in your revenue, supply chain and day-to-day operations. Any unexpected expenses need to be addressed quickly to ensure they don't cause cash flow interruptions with key partners or ongoing obligations.
1. How strong is my cash flow forecast for early 2026?
Why is cash flow forecasting so important during this time? Isn’t it enough to be profitable? To survive, your business should have the cash available when employees, landlords, vendors, and other vital partners need to be paid. To do that, you must be able to effectively forecast your future inflows and expenses and manage cash flow as your operational needs change.
A small business cash flow projection reveals the breakdown of money expected to come in and out of your business. This includes calculating your income and all of your expenses, which should give you a clear idea of how much cash you'll be left with over a specific period of time.
2. What does my profit and loss analysis reveal about this year’s performance?
A year-end profit and loss analysis will reveal your biggest revenue-producing products and services. For all your underperforming products, you'll know to adjust pricing or put more effort toward targeted promotions. The analysis will also show you patterns relating to labor cost inefficiencies. You can use the data to refine your staffing and scheduling tactics. Net profit margin trends provide a clear picture of your overall financial health. If you notice a downward trend, you'll have the insight you need to request additional funding for early-year expenses.
3. Have I maximized year-end small business tax planning opportunities?
Taxes are never simple, and the evolving legislative changes heading into 2026 could make the coming year more complex than expected. The best way to avoid headaches and unnecessary costs is to review your tax obligations with a financial professional.
If you’re ever being audited by the IRS, combining your personal and business expenses will create a logistical nightmare. This is why it’s typically a smart move to open a business checking account. In addition to making tax time easier, this step can also strengthen your business credit. Check out this blog post for more in-depth information about business credit cards: Finding the Right Credit Card for Your Small Business
4. Is my small business debt management strategy sustainable?
When you run a business, whether you’re a startup or you’ve been in the game for a long time, there may come a time when you need additional funding. You might want to expand your business, knowing full well that demand is there, but you may not have the cash on hand to speed up production. That’s when taking on some debt may be a real advantage.
Not all debt is the same
When you’re considering how much debt is too much, keep in mind that different debts affect your business differently. When you’re not paying back bank loans, interest is going to pile up, and you’re going to have a hard time finding people to lend to you in the future. And when you don’t pay back suppliers, you’re not only hurting your reputation but also damaging your reputation with that supplier, sometimes beyond repair.
How much debt is too much?
There’s no fixed dollar amount for how much debt is too much. You may be able to use a number of hands-on approaches to determine if you have too much debt. Are you missing monthly payments? You probably have too much debt. Are you constantly stressed about your debt levels? You probably have too much debt. Some of the guidelines used for business debt are similar to those used for personal debt: When it’s too much, you can often feel it.
Recognizing these signs is especially important during year-end financial reviews. You’ll find it much easier to prepare your business for a healthier, more sustainable start to the upcoming year when you clearly understand your debt position and take action before small issues become bigger ones.
Managing debt
Managing your small business debt can be broken down into three parts: taking on the right amount of debt, paying off the right debts, and handling situations where you’ve taken on too much debt.
When it comes to paying off debts, it’s important to look at the terms of each debt and determine which ones should take priority. Things to look for include steep consequences for defaulting, high interest rates, and the importance you place on your relationship with the lender. As the year comes to a close, reviewing your debt strategy alongside your year-end finances may help you enter the new year on a stronger financial footing.
Options to reconcile debt
When you have too much debt, you typically have a number of options at your disposal. Understanding what debt can be written off can help you decide whether to restructure your debts, negotiate with your creditors, or file for bankruptcy.
5. Are my financial records accurate and up-to-date?
You, of course, want accurate financial records at all times, but they are especially important at year-end. Someone needs to carefully review or audit all bookkeeping, bank statements, invoices, and expense reports to confirm their readiness for tax filing. Using analytics to identify trends in the documents may be a benefit for first-of-the-year marketing and budget meetings. Doing the reconciliation during year-end reviews is crucial. If your accountant or auditor finds any inconsistencies or discrepancies, this gives them time to correct the records before filing deadlines.
6. What are my biggest recurring expenses, and can I reduce them in 2026?
What is it that you're spending the most money on? Is it staff salary and wages? Transportation costs? Inventory purchases? Whatever your major recurring expenses are, you need to find ways to reduce them. Looking at these expenses at year-end provides opportunities for strategic adjustments before the new year. This way, you can spend all of 2026 focusing your time on growth-related goals. Accessing certain price reductions may require renegotiating rates, switching providers or streamlining internal processes using AI or automation.
7. Do I need to adjust my business budget for 2026?
Yes, every year deserves a new budget plan. What worked for you last year may not be the most cost-efficient way to run your business during 2026. You need a budget that aligns with your new goals whether it means expanding certain departments or taking on new investments to fix outdated processes.
8. Am I prepared for potential economic changes or slower sales periods?
Year-end is when you want to double-check that you're ready to take on any slow periods or economic changes that may occur in 2026. If you wait until the downturn occurs, you put yourself in a bad spot. For example, if a supply chain disruption were to cause your company to halt production for several weeks, and you don't have a financial cushion, you might have to close down permanently. Reviewing your sales patterns and cash flow is one of the best ways to predict potential risks. Having a contingency plan in place is vital to protecting your business when you face unexpected challenges.
9. How well is my business positioned for growth next year?
Businesses that position themselves for growth tend to share several of the same characteristics: They always monitor financial trends, never overspend impulsively and often keep a reserve fund to address any unexpected costs. They don't make themselves vulnerable by relying on unstable revenue streams. If your company can maintain this level of discipline, it will have a much easier time reaching its growth goals without major setbacks.
10. Should I explore refinancing or additional funding options before year-end?
Year-end is the prime time to evaluate how new capital could strengthen your operations. If you already have debt in the form of small business loans or credit lines, you should check out refinancing options. You may be able to reduce your interest rates and monthly payments without extending your terms. You could put the money you save toward equipment upgrades or hiring extra staff to further increase your growth opportunities.
Final thoughts
When 2026 is in full swing, you’ll be well-positioned to navigate the challenges and opportunities ahead. Stay informed about new legislation and federal updates that may affect financial relief or small-business funding programs. And if you need guidance, reach out to a financial professional, or see if you pre-qualify for an SBA loan designed to support long-term stability and growth.
