The Fourth-Quarter Business Checkup Every Small Business Owner Should Complete Before December 31
We’re officially in the final stretch of 2026.
The holidays are approaching. The calendar is filling up. Customers need attention, employees have questions, bills keep coming, and there’s always something that needs to get done.
For many small business owners, November and December become a race to the finish line.
They’re focused on getting through the year.
But here’s a question I want you to consider:
What if the decisions you make during the next eight weeks could have a bigger impact on your business than everything you did during the previous ten months?
Think about that.
You still have time to make important financial decisions.
You still have time to review your taxes.
You still have time to strengthen your cash flow.
And you still have time to prepare your business for a more profitable 2027.
Unfortunately, many entrepreneurs don’t start thinking about these things until January.
And by then, some opportunities have already passed.
At BizAccountants, we believe the final months of the year should be about more than simply closing the books.
They should be about building a stronger business.
That’s why this week we’re sharing five smart moves every business owner should consider before December 31.
These aren’t complicated financial theories.
They’re practical steps that can help you legally minimize taxes, improve profitability, protect cash flow, and prepare for growth.
Let’s get started.
Smart Move #1: Review Your Financial Performance Before the Year Ends
Let’s begin with a question.
Do you know how much profit your business has actually generated so far in 2026?
Not how much revenue you’ve collected.
Not how much money is in your checking account.
Your actual profit.
You might be surprised how many business owners can’t confidently answer that question.
They know they’re busy.
They know customers are paying.
They know expenses are being covered.
But they don’t have a clear picture of their company’s financial performance.
And that creates a problem.
Because you can’t make good financial decisions without understanding your numbers.
Start With Your Profit & Loss Statement
Your Profit & Loss Statement, often called a P&L, shows how much revenue your business generated and the expenses incurred during a specific period.
It helps answer important questions:
Is revenue increasing or decreasing?
Are expenses growing faster than sales?
Are profit margins improving?
Which expenses are consuming the most money?
Are certain products or services more profitable than others?
Let’s look at an example.
Imagine your business generated the following results:
| 2025 | 2026 Projected | |
|---|---|---|
| Net Profit | $100,000.00 | $100,000.00 |
| Expenses | $400,000.00 | $550,000.00 |
| Revenue | $500,000.00 | $650,000.00 |
| Profit Margin | 20% | 15.4% |
At first glance, the company appears to be growing.
Revenue increased by $150,000.
That’s a 30% increase.
But look at the bottom line.
Profit didn’t increase at all.
In fact, the profit margin declined from 20% to approximately 15.4%.
The business is generating more revenue but keeping a smaller percentage of every dollar.
And here’s the uncomfortable part.
The owner may be working significantly harder without making any additional profit.
That’s why reviewing your financial performance is so important.
Growth isn’t just about generating more sales.
It’s about creating more value from the sales you generate.
Find the Expenses That Are Eating Your Profits
Now take a closer look at your expenses.
Perhaps your payroll costs have increased.
Maybe advertising expenses have doubled without producing better results.
Maybe you’re paying for software subscriptions nobody uses.
Maybe your insurance costs have risen.
Or perhaps your pricing hasn’t kept up with the cost of doing business.
Each of those issues can quietly reduce profitability.
The fourth quarter is an excellent time to identify those problems and decide what needs to change.
Your Action Step
Before November ends, review your year-to-date P&L and compare it with 2025.
Identify your three largest expense categories and determine whether those expenses are producing enough value.
Then ask yourself:
“If I could improve one financial number in my business next year, which one would make the biggest difference?”
That answer may become one of your most important goals for 2027.
Smart Move #2: Finalize Your 2026 Tax Planning Before December 31
Here’s something I say frequently:
Tax preparation and tax planning are not the same thing.
Tax preparation tells you what happened.
Tax planning helps you make decisions before certain opportunities disappear.
And right now, time matters.
For calendar-year businesses and individuals, December 31 is an important cutoff for many tax-related decisions.
Some opportunities may remain available after year-end, but others require action during the tax year.
That’s why November is an excellent time to review your projected 2026 tax liability.
Don’t Wait Until April to Discover Your Tax Bill
Imagine this scenario.
Your business had an excellent year.
Revenue increased.
Profits improved.
Everything seems to be going well.
Then April arrives.
Your accountant prepares your return and tells you that you owe $35,000.
You weren’t expecting it.
You haven’t reserved the money.
And now you’re scrambling to figure out how to pay.
That’s a situation many business owners would prefer to avoid.
And in some cases, it can be prevented through better planning.
Estimate Your Taxes Now
Your accountant should review your financial information, projected income, applicable deductions, and other relevant circumstances to estimate your potential tax liability.
That estimate gives you an opportunity to prepare.
It may also identify legitimate tax-saving strategies.
Depending on your situation, those strategies might involve:
Retirement contributions. Certain retirement arrangements may provide tax benefits, subject to contribution limits, plan requirements, and deadlines.
Equipment and technology purchases. Qualifying business property may be eligible for favorable depreciation treatment, including Section 179 or bonus depreciation, depending on applicable rules.
Business structure. Your entity classification can significantly affect taxation, compensation, and how earnings are distributed.
Tax credits. Certain businesses may qualify for federal or state tax credits.
Expense documentation. Reviewing business records may help identify legitimate expenses that haven’t been properly recorded.
But here’s something important.
You should never spend money unnecessarily just to create a tax deduction.
We discussed this in a recent blog post.
If you spend $20,000 simply to save $5,000 in taxes, you’ve still incurred a $15,000 after-tax cost.
That’s not automatically a good business decision.
The best tax strategies support your business goals.
They don’t undermine them.
What About Your Business Structure?
This is also a good time to review whether your current business structure continues to make sense.
Perhaps you started as a sole proprietor.
Maybe you formed an LLC.
Perhaps your business is taxed as an S corporation or C corporation.
As profitability increases, your needs may change.
At BizAccountants, we frequently discuss how C corporations can provide valuable planning opportunities for certain business owners, particularly when earnings are retained and reinvested.
However, no single structure is right for every company.
C corporations can face additional taxation when profits are distributed as dividends, and changing structures can create significant tax consequences.
That’s why entity planning should consider the complete financial picture.
Your Action Step
Schedule a tax planning review before December 31.
Ask your accountant:
“Based on my projected 2026 income, what tax obligations should I prepare for, and are there any legitimate planning opportunities I should consider before year-end?”
That conversation could be one of the most valuable meetings you have this quarter.
Smart Move #3: Strengthen Your Cash Flow Before January
Let’s talk about something that can make or break a business.
Cash flow.
In last week’s article, we discussed why a company can report substantial profits while struggling to keep money in the bank.
It’s an important issue.
Because profit and cash flow are not the same thing.
Your business might have $100,000 in outstanding customer invoices.
You might have money tied up in inventory.
You might be making substantial loan principal payments.
Or perhaps you’ve invested heavily in equipment.
All of those situations can reduce available cash without necessarily reducing accounting profit by the same amount.
And when January arrives, you don’t want to discover that your business has a cash shortage.
Start With Your Accounts Receivable
If your company invoices customers, review how much money is currently outstanding.
Look at invoices that are:
30 days old.
60 days old.
90 days old.
Or even older.
Now ask yourself:
“How much of this money could we realistically collect before December 31?”
Sometimes improving cash flow doesn’t require generating more sales.
It requires collecting the money you’ve already earned.
Review Your Upcoming Expenses
Next, estimate how much cash your business will need through the end of the year.
Include payroll, rent, utilities, insurance, vendor payments, debt obligations, taxes, and planned purchases.
Then compare those expenses with the cash you expect to receive.
Here’s a simplified example:
Cash Flow Item
Amount
Current cash balance
$40,000
Expected customer collections
$75,000
Total available cash
$115,000
Expected operating payments
($65,000)
Debt payments
($15,000)
Planned tax payments
($20,000)
Projected ending cash
$15,000
At first glance, the company has $40,000 in the bank.
But after considering expected collections and upcoming obligations, its projected year-end balance is only $15,000.
That’s valuable information.
Because it allows the owner to make decisions before a problem develops.
Perhaps an unnecessary purchase should be postponed.
Perhaps customer collections need more attention.
Perhaps operating expenses can be reduced.
Or perhaps the company needs to adjust its spending plans.
Build a Cash Reserve
Another important consideration is your emergency cash reserve.
How long could your business continue operating if revenue suddenly declined?
One week?
One month?
Three months?
There’s no universal reserve amount that works for every company.
But having financial breathing room can protect your business from unexpected challenges.
A cash reserve gives you options.
And options create stability.
Your Action Step
Prepare a cash flow forecast covering the remainder of 2026 and at least the first quarter of 2027.
Identify any weeks or months when cash could become tight.
Then develop a plan to address those potential shortages before they happen.
The best time to solve a cash flow problem is before it becomes an emergency.
Smart Move #4: Evaluate Your Investments for Growth
Now let’s shift from protecting your business to growing it.
One of the biggest mistakes entrepreneurs make is assuming that every additional dollar should either be spent immediately or left sitting in the bank.
Neither approach is automatically correct.
The better question is:
“Where can my money create the greatest value?”
That might mean investing in marketing.
It might mean hiring an employee.
It might mean purchasing equipment.
It might mean improving technology.
Or it might mean reducing expensive debt.
The right decision depends on your business.
Identify Your Biggest Bottleneck
Think back to our September series about growing a business toward $1 million.
We discussed how growth often exposes weaknesses in a company’s systems.
Maybe your business has plenty of customers, but not enough employees to serve them.
Maybe your marketing generates leads, but your sales process isn’t converting them.
Maybe you’re spending too much time on administrative tasks.
Maybe your equipment limits production.
Or perhaps your biggest problem is simply that you don’t have enough working capital.
Before investing in anything, identify the bottleneck that’s preventing your business from moving forward.
Then determine what it would cost to solve that problem.
The $15,000 Investment Example
Suppose your company is considering investing $15,000 in technology that automates repetitive administrative work.
Your employees currently spend approximately 20 hours per week performing those tasks.
If the technology reduces that work by 15 hours per week, and the loaded labor cost is $30 per hour, the potential annual labor capacity savings would be:
15 hours × $30 × 52 weeks = $23,400
That’s a meaningful benefit.
But there’s an important distinction.
The business doesn’t automatically save $23,400 in cash unless those hours actually reduce labor spending.
If the employees use the recovered time to serve more customers, the benefit may instead come from additional productive capacity.
Either way, the investment could be valuable.
The point is to measure the expected return.
Don’t Forget About Marketing
Marketing can also be an excellent investment when you understand the economics.
Suppose your company spends $5,000 on a campaign.
That campaign generates 20 new customers.
Each customer produces an average of $1,000 in revenue.
That’s $20,000 in revenue from a $5,000 marketing investment.
Sounds great.
But before celebrating, you need to understand the costs associated with serving those customers.
If fulfillment costs are $12,000, the campaign produces only $3,000 in contribution after those costs and the marketing spend, before other overhead and taxes.
Still potentially worthwhile.
But very different from assuming you made $15,000 in profit.
Smart business owners measure profitability—not just revenue.
Your Action Step
Identify one investment that could make your business stronger in 2027.
Estimate the cost.
Estimate the expected financial benefit.
Determine how you’ll measure success.
Then decide whether the investment makes sense based on your cash flow and overall financial position.
Smart Move #5: Set Clear Financial Goals for 2027
Now for the most important part.
Planning for what comes next.
Many business owners begin January with a vague goal:
“I want to grow my business this year.”
That’s a good intention.
But it’s not a complete plan.
How much do you want to grow?
How much profit do you want to generate?
How much cash do you want to keep?
What expenses need to change?
What investments will be required?
Without specific targets, it’s difficult to measure progress.
Start With Three Numbers
I recommend beginning with three financial goals.
1. Revenue
How much revenue do you want your business to generate in 2027?
2. Profit
How much of that revenue do you want to keep after expenses?
3. Cash Reserves
How much cash do you want available to support operations and future opportunities?
Let’s look at an example.
Suppose your business expects to finish 2026 with:
Revenue: $600,000
Net Profit: $90,000
Profit Margin: 15%
Now imagine your 2027 goals are:
Revenue: $750,000
Net Profit: $150,000
Profit Margin: 20%
That’s a meaningful improvement.
But here’s the key.
You’re not simply trying to increase revenue by $150,000.
You’re trying to increase profit by $60,000.
And that requires more than selling additional products or services.
It may require better pricing.
Improved efficiency.
Lower operating costs.
More profitable customers.
Better systems.
Or a combination of those strategies.
Break Your Goals Into Quarterly Targets
Annual goals can feel overwhelming.
So break them into smaller milestones.
For example:
First Quarter: Improve financial reporting, review pricing, and establish cash flow targets.
Second Quarter: Implement marketing improvements and measure customer acquisition costs.
Third Quarter: Evaluate staffing, technology, and operational capacity.
Fourth Quarter: Review results, optimize profitability, and prepare for the following year.
Each quarter should have measurable goals.
And someone should be responsible for tracking progress.
Review Your Numbers Monthly
This is where many business owners fall short.
They create a business plan in January.
Then they put it in a drawer.
And they don’t look at it again until December.
That’s not planning.
That’s wishful thinking.
A good business plan should be reviewed regularly.
At minimum, compare your actual results against your goals every month.
If revenue is behind target, investigate why.
If expenses are too high, determine what’s changed.
If cash flow is weakening, take action.
The purpose of a financial plan isn’t to predict everything perfectly. It’s to help you recognize problems and opportunities early enough to respond.
Your Action Step
Before December 31, establish your 2027 revenue, profit, and cash reserve targets.
Then identify three specific actions that will help you reach those goals.
Write them down.
Assign deadlines.
And review your progress every month.
The Fourth-Quarter Business Checkup: Your 5-Step Action Plan
We’ve covered a lot of ground.
Now let’s turn it into something practical.
Before 2026 ends, make sure you’ve completed these five steps:
Your 2026 Year-End Action Plan
- Review your 2026 financial performance and identify opportunities to improve profitability.
- Estimate your 2026 tax liability and evaluate legitimate year-end planning opportunities.
- Prepare a cash flow forecast and strengthen your available cash reserves.
- Evaluate potential investments based on their expected return and business value.
- Set measurable revenue, profit, and cash reserve goals for 2027.
These five steps may seem simple.
But here’s what makes them powerful.
They address the most important parts of building a financially healthy business.
Profitability.
Taxes.
Cash flow.
Investments.
And growth.
When those areas work together, your business is in a much stronger position to succeed.
What Happens If You Do Nothing?
Let’s consider the alternative.
You finish 2026 without reviewing your financial statements.
You don’t estimate your tax liability.
You don’t examine your cash flow.
You don’t evaluate unnecessary expenses.
And you enter 2027 without clear financial goals.
What happens?
Maybe everything works out.
But maybe you discover a large tax bill you weren’t prepared for.
Maybe your expenses continue growing faster than revenue.
Maybe you miss an opportunity to improve profitability.
Maybe a cash flow shortage forces you to make expensive financial decisions.
Or perhaps another year passes without your business making the progress you hoped for.
That’s the real cost of failing to plan.
It’s not always the money you lose today. Sometimes it’s the opportunities you miss tomorrow.
And those missed opportunities can add up over time.
The Difference Between Working Hard and Building a Strong Business
Most small business owners I meet don’t have a problem with working hard.
They work incredibly hard.
Long hours.
Weekends.
Holidays.
Early mornings.
Late nights.
They do whatever it takes to keep the business moving forward.
But hard work alone doesn’t guarantee financial success.
You can work 60 hours a week and still struggle with cash flow.
You can generate a million dollars in revenue and keep very little profit.
You can have dozens of employees and still feel like everything depends on you.
That’s why I believe business owners need to spend more time working on their businesses—not just in them.
Reviewing financial statements.
Planning taxes.
Managing cash flow.
Evaluating investments.
Setting measurable goals.
These activities may not feel as urgent as answering customer calls or completing daily tasks.
But they can have a much greater impact on your long-term success.
A stronger business isn’t necessarily built by working more hours. It’s built by making better decisions.
Your 2027 Success Starts Before January 1
Here’s the message I want to leave you with.
Don’t wait until January to start thinking about next year.
Don’t wait until tax season to discover what you owe.
Don’t wait until your bank account is nearly empty to examine cash flow.
Don’t wait until expenses become overwhelming to review profitability.
And don’t wait until your business stops growing to identify what’s holding it back.
You still have time.
Time to review your numbers.
Time to make informed decisions.
Time to address financial weaknesses.
Time to evaluate opportunities.
And time to build a plan for a stronger 2027.
Remember:
The businesses that finish strong aren’t simply the ones that generate the most revenue. They’re the ones that understand their numbers, manage their money, and make decisions with a clear strategy.
You don’t need to have every answer today.
But you do need to start asking the right questions.
And the five smart moves we’ve discussed are an excellent place to begin.
Final Thoughts: Finish Strong. Start Even Stronger.
As we approach the end of 2026, I encourage every business owner to take a little time away from the daily demands of running their company.
Sit down.
Review your financial information.
Talk with your accountant.
Think about what worked this year.
Think about what didn’t.
And most importantly, decide what you want to do differently in 2027.
Because the final weeks of the year aren’t simply about closing the books.
They’re about opening the door to new opportunities.
Your business deserves more than another year of simply getting by.
It deserves a strategy.
It deserves financial clarity.
And it deserves a plan for sustainable, profitable growth.
Finish 2026 strong. Start 2027 even stronger.
Let BizAccountants Help You Build a Stronger 2027
At BizAccountants, we believe business owners deserve more than someone who simply prepares their tax returns.
They deserve a partner who helps them understand their finances, identify legitimate tax-saving opportunities, and make smarter decisions about their company’s future.
That’s why we focus on proactive tax planning, bookkeeping, tax preparation, payroll support, and business growth strategies.
Our goal is simple:
Help you legally keep more of what you earn—and use that money to build a stronger, more profitable business.
Whether you need help reviewing your 2026 financial performance, estimating your year-end taxes, strengthening cash flow, or developing a financial strategy for 2027, we’re here to help.
Don’t wait until the year is over to start planning for what’s next.
BizAccountants — Your Profit & Growth Coach
Because saving taxes is only the first step. Building a more profitable business is the goal.
BizAccountants is your trusted guide on the path to financial clarity and business success. We are a dedicated team of accounting professionals committed to delivering expert advice and comprehensive services tailored to meet the unique needs of small and medium-sized businesses. At BizAccountants, we believe in building strong, lasting relationships with our clients by providing transparent, strategic, and proactive support in areas such as tax planning, bookkeeping, payroll, and business consulting.
