There is something powerful about a new year. A fresh set of books. A clean slate. But that fresh start only works if you actually close out the old year properly and set up the new one with intention.
Every January, we walk our clients through this exact checklist. It takes a few weeks of focused effort, but the businesses that do it run smoother for the entire year ahead.
Closing Out 2025
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Week 1: Final Reconciliation
Reconcile every bank account and credit card through December 31. Verify that all December transactions are recorded. Check petty cash if you have it. This is the foundation. Nothing else works if this is not done right.#
Week 2: Year-End Adjustments
Record depreciation entries. Adjust prepaid expenses and accrued liabilities. Review accounts receivable and write off anything truly uncollectible. Verify inventory counts if applicable. Make sure all 2025 payroll is finalized.#
Week 3: Tax Document Prep
Issue W-2s to employees by January 31. Issue 1099s to contractors you paid $600 or more by January 31. Organize receipts and documentation for deductions. Compile charitable contribution records.#
Week 4: The Year in Review
Run your final 2025 P&L and compare it to 2024. Generate your year-end Balance Sheet. Calculate your key metrics: revenue growth, profit margin, cash position. Take 30 minutes to write down what worked, what did not, and what you want to do differently.Setting Up 2026
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Clean Up Your Chart of Accounts
Remove accounts you no longer use. Add new ones for new revenue streams or expense categories. A clean chart of accounts makes every report more useful all year long.#
Build Your 2026 Budget
Start with 2025 actuals as your baseline. Adjust for planned changes like price increases, new hires, or expansion. Build in a 5-10% contingency for unexpected costs. Break the annual budget into monthly targets so you have something to measure against.#
Review Your Systems
Is your accounting software subscription current? Are bank feeds connected and working? Is your payroll system updated for 2026 tax rates? Do you need any new integrations or tools?#
Update Recurring Transactions
Verify that all monthly recurring charges are still accurate. Update vendor pricing changes. Set up recurring invoices for new clients. Cancel subscriptions you no longer need.Tax Planning for 2026
Set your quarterly estimated tax payment amounts based on projected income. Mark the due dates on your calendar: April 15, June 15, September 15, and January 15 of 2027.
If your income has changed significantly, review whether your entity structure still makes sense. The deadline to elect S-Corp status for 2026 is March 15.
The January Mindset
January is your opportunity to be intentional about your finances before the year gets away from you. Every hour invested now saves five hours of reactive cleanup later. The businesses that close out the prior year properly and set up the new year deliberately run smoother all year long.
Need help with any of this? That is literally what we do. Reach out and let us make 2026 your best financial year yet.