The last quarter of the year is a natural time to look at the previous nine months and evaluate what worked for your business and what didn’t. However, it’s important that you don’t only view the last quarter of the year as a time of review because it’s also a time to prepare for the coming year.
A year-end review doesn't need to become a massive strategic planning exercise. Start with the business's financial position, identify areas that are contributing to inefficient spending or limiting capacity, and decide which problems actually need attention now. From there, you may be able to use what you've learned to prepare for the first quarter and determine whether the business needs additional resources, including financing, to accomplish its goals.
Start with a clear picture of where the business stands
Before you decide what your business needs to do next year, you need to get a clear understanding of where it stands this year. Review year-to-date revenue, expenses, profit, cash flow, outstanding debt, accounts receivable, accounts payable, inventory, and available cash. Compare the current numbers with the same period last year and with the forecast that you prepared at the beginning of 2026.
The goal isn’t to decide if 2026 was profitable or not. Ideally, you already know where your business stands regarding profitability. Instead, this is an opportunity to look at the underlying economics of your company. See whether margins improved, customers paid quickly, or if there’s an expense growing faster than revenue. Understanding your cash flow and the underlying economics of your business may help you make more informed decisions about where to focus resources in the year ahead.
Find the financial leaks
Some financial issues are easy to spot. Others may be small enough to go unnoticed until they have a significant impact on your company’s cash flow. Look for recurring expenses that no longer provide enough value, subscriptions or software the business rarely uses, unnecessary fees, excess inventory, inefficient purchasing, and other costs that may be reduced without affecting the customer experience.
Don't treat every expense as something that needs to be eliminated. Some costs support growth, customer service, employee productivity, or long-term efficiency. The objective is to understand where money is going and determine whether each significant expense is still serving the business's priorities.
Get your books and records ready for 2027
Clean financial records may make it easier to understand the current year and prepare for the next one. Before the year closes, reconcile business bank and credit card accounts, review outstanding invoices and bills, organize receipts and supporting documentation, and make sure major transactions have been recorded correctly. This becomes especially important when it comes time to file your taxes next year.
Accurate records may also make future financing conversations easier. Getting those records organized before you need them may reduce the work involved in evaluating a financing opportunity later.
Look closely at what’s slowing the business down
Not every business problem appears on an income statement. Operational bottlenecks may limit growth even when sales are healthy. Think about where work regularly gets delayed, repeated, corrected, or handed between employees unnecessarily. Consider your staffing, technology, equipment, inventory, vendors, and customer communication. All of these crucial steps may become potential bottlenecks that spread to other parts of the business.
Decide which problems actually need fixing now
Some issues within your business may be more pressing than others. Things that directly influence how your clients and customers are served may be more important than a piece of office equipment that needs to be updated. If you have to choose between addressing problems with both, focusing on the one that directly influences your bottom line may be the better option.
You should also consider whether a problem is actually a symptom of something larger. For example, if your employees are constantly working overtime, the answer may not be hiring more people immediately. The underlying issue could be inefficient processes, insufficient equipment, scheduling problems, or stronger-than-expected demand. Understanding the cause may help you avoid spending money to address the wrong problem.
Prepare for the first quarter before it arrives
January often brings a unique set of cash-flow pressures, and preparing for them during the last 90 days of the year may be beneficial. Review recurring expenses, upcoming tax obligations, insurance payments, payroll needs, vendor commitments, loan payments, and other expenses that will come due during the first quarter.
Look at the first quarter from this year, with a special emphasis on January. That data should help you understand what next January may look like. If your business has signed contracts or predictable customer demand, incorporate that information into your expectations. Preparing early may provide you with more options, whether it involves building a larger cash reserve, applying for financing, or accelerating collections.
Turn this year’s numbers into next year’s forecast
Your 2026 financial results may be useful as the starting point for your 2027 forecast. Begin with actual revenue and expenses, and then identify which numbers may be the most likely to change. Consider pricing, customer volume, payroll, rent, insurance, inventory costs, debt payments, planned equipment purchases, and other significant expenses.
It may also be wise to build multiple scenarios. Build more than one scenario if the business has meaningful uncertainty. A basic forecast may be used to represent what you currently expect. A stronger-growth scenario may show what happens if sales exceed expectations, while a slower-growth scenario might help you understand how the business would handle weaker revenue.
Know when financing belongs in the plan
Depending on what your year-end review uncovers, as well as your plans and projections for next year, you may find that financing needs to be a part of the process. For example, a business may need new equipment, additional working capital, a larger facility, or funds to acquire another business.
If financing is part of your plan for January, SmartBiz Bank® may be able to help. Find out if you pre-qualify.
FAQs
What should a small business do before the end of the year?
Review your financial statements, reconcile accounts, organize business records, evaluate expenses and cash flow, review outstanding receivables and payables, identify operational bottlenecks, and prepare a forecast for the coming year. You should also review upcoming first-quarter expenses and determine which business improvements need to be addressed before the end of the current year.
How do I create a 90-day business plan?
Divide the next 90 days into three stages. First, assess your financial and operational performance. Next, address the problems that have the greatest effect on cash flow, efficiency, or customer service. Finally, use what you've learned to establish priorities, build a first-quarter plan, create financial projections, and identify any resources or financing the business may need.
How can I prepare my small business financially for the new year?
Start by closing out your current financial records and reviewing your income statement, balance sheet, and cash flow statement. Review outstanding invoices and bills, upcoming expenses, existing debt, and available cash. Then, build a realistic revenue and expense forecast for the coming year, including monthly or quarterly projections for the first quarter.
What financial statements should a small business review at year-end?
Review your income statement, balance sheet, and cash flow statement. The income statement helps you evaluate revenue, expenses, and profitability. The balance sheet shows the business's assets, liabilities, and equity at a point in time. The cash flow statement helps you understand how cash moved through operating, investing, and financing activities. Reviewing all three together gives you a more complete picture of the business's financial position.
Should I get a business loan before the end of the year?
The timing of a business loan should depend on the purpose of the financing, the business's cash flow, the cost of borrowing, and when the funds will actually be needed. Taking on debt simply because the calendar year is ending may not make sense. If you're planning a specific investment for 2027, however, it may make sense to consider financing before the need becomes urgent. If you’re planning a growth initiative that requires additional funds during the first quarter next year, applying for the funds now may be a good idea.
