Fourth-Quarter Financial Checklist: What Every Business Should Do Before Year-End

By: Al DePalantino

The fourth quarter isn’t just about finishing the year strong. It’s one of the most important times of the year for business bookkeeping, accounting, and tax planning.

By October, November, and December, you have enough information to see how your business performed, but you may still have time to make decisions that affect your financial position and tax liability before December 31.

Waiting until tax season can mean discovering opportunities after it’s too late to act on them.

So, what should a business do financially before the end of the year? Start by cleaning up your books, reviewing income and expenses, evaluating estimated taxes, preparing payroll and contractor records, and meeting with your accountant to discuss year-end tax-planning opportunities.

Here are some important items to put on your fourth-quarter financial checklist.

1. Make Sure Your Books Are Up to Date

Before you can make good year-end decisions, you need accurate numbers.

Review your bookkeeping and make sure transactions have been properly recorded and categorized. Reconcile your bank and credit card accounts and investigate any unexplained discrepancies.

Pay particular attention to:

• Accounts receivable
• Accounts payable
• Bank reconciliations
• Credit card accounts
• Payroll
• Inventory
• Business loans
• Owner contributions and distributions
• Fixed assets and equipment purchases
• Business expenses

Accurate bookkeeping gives you a much clearer picture of where your business actually stands and provides the foundation for meaningful tax planning.

2. Review Your Profit and Loss Statement

How profitable has your business been this year?

Your profit and loss statement can help answer that question before the year is over.

Compare this year’s results with last year’s and, if applicable, your current budget. Look for significant changes in revenue, expenses, and profitability.

If sales increased substantially, your tax liability may also be higher than expected. If expenses increased, determine why. If margins are shrinking, you may uncover issues that should be addressed going into the new year.

Don’t look only at revenue.

More sales don’t necessarily mean more profit.

Understanding the complete financial picture can help you make better decisions about taxes, spending, pricing, hiring, and growth.

3. Review Your Estimated Tax Payments

One unpleasant surprise business owners want to avoid is discovering at tax time that they significantly underpaid their taxes during the year.

If your business performed differently than expected, the estimated payments you calculated earlier in the year may no longer reflect your actual tax situation.

Fourth quarter is a good time to review:

• Year-to-date income
• Projected year-end income
• Estimated tax payments already made
• Payroll withholding
• Changes in business ownership or structure
• Significant gains or losses
• Other income that may affect your overall tax liability

Your accountant can help determine whether adjustments should be considered before year-end or for the next estimated tax payment.

4. Talk to Your Accountant Before Making Major Year-End Purchases

You may have heard that buying equipment before December 31 can reduce your taxes.

Sometimes that’s true, but “buy it because it’s deductible” isn’t necessarily good business advice.

Before making a large purchase primarily for tax reasons, discuss it with your tax professional.

Depending on your circumstances, the timing and tax treatment of equipment, technology, vehicles, machinery, furniture, and other business assets can affect your deductions.

The important question isn’t simply:

“Can I deduct this?”

It’s:

“Does my business need this, and when does purchasing it make the most financial and tax sense?”

Tax considerations should support a sound business decision – not create an unnecessary expense.

5. Review Accounts Receivable

Take a close look at who owes your business money.

Which invoices are current? Which are 30, 60, or 90 days past due? Are there balances you’ve been carrying that may never be collected?

Year-end is a good time to follow up on outstanding invoices and review potentially uncollectible accounts with your accountant.

Cleaning up accounts receivable also gives you a more realistic picture of your company’s financial condition as you enter the new year.

6. Review Accounts Payable

Now look at what your business owes.

Make sure vendor bills and other liabilities have been entered correctly and that your records reflect outstanding obligations.

Review upcoming payments so you understand your cash needs heading into the new year.

Managing receivables and payables together can also give you a much clearer picture of cash flow, which isn’t necessarily the same thing as profitability.

A company can be profitable on paper and still struggle to pay its bills if cash isn’t coming in when it’s needed.

7. Review Inventory

If your business carries inventory, year-end is an important time to make sure your records accurately reflect what you actually have.

Identify inventory that is:

• Missing
• Damaged
• Obsolete
• Unsellable
• Incorrectly valued or counted

Don’t simply adjust inventory records without understanding the accounting and tax implications. Discuss significant discrepancies with your accounting professional.

8. Get Ready for W-2s and 1099s

Don’t wait until January to start gathering year-end reporting information.

Review employee records and make sure names, addresses, Social Security numbers, and other necessary information are accurate.

Do the same for independent contractors and other vendors who may require information reporting.

The IRS generally requires Form W-2 and Form 1099-NEC reporting by January 31, subject to the rules applicable to the particular payment and recipient.

Preparing now can help prevent a frantic search for missing information after the holidays.

9. Review Contractor Information

If you used independent contractors during the year, make sure you have the information needed to determine whether information returns will be required.

This is particularly important because federal reporting requirements can change.

For payments made in 2026, for example, the IRS states that the reporting threshold for certain nonemployee compensation reported on Form 1099-NEC is $2,000, rather than the $600 threshold applicable to payments made before 2026.

Businesses should review their specific payments and reporting requirements with their tax professional rather than assuming last year’s rules still apply.

10. Review Payroll Before the Final Payroll of the Year

Year-end payroll errors can create unnecessary headaches in January.

Before processing your final payrolls, review employee information and discuss any special year-end items with your payroll or accounting professional.

Depending on your company and compensation arrangements, there may be issues involving bonuses, fringe benefits, owner compensation, retirement contributions, or other items that need proper payroll and tax treatment.

Employers also have year-end and fourth-quarter employment-tax reporting obligations, so getting payroll records organized now can make January much easier.

11. Review Your Retirement Plan and Employee Benefits

Fourth quarter is also a good time to review your company’s retirement plan and employee benefits.

Depending on the type of retirement plan and your business structure, there may be deadlines affecting plan establishment, employee deferrals, employer contributions, or other decisions.

Don’t assume that every retirement-related decision can be postponed until you file your tax return.

Ask your tax and financial professionals what must be completed before December 31 and what can be handled later.

12. Look for Legitimate Year-End Tax-Planning Opportunities

Tax preparation tells you what happened. Tax planning looks at what you may still be able to do about it.

Depending on your business, year-end planning discussions might include:

• Timing of income and expenses
• Equipment and asset purchases
• Depreciation strategies
• Retirement-plan contributions
• Employee bonuses
• Business credits and deductions
• Owner compensation
• Entity structure
• Capital expenditures
• Estimated taxes

The right strategy depends on your individual business and tax situation.

This is exactly why tax planning should happen before the calendar turns to January.

13. Review Your Business Structure

As businesses grow and change, the structure that made sense when the company started may not always remain the most appropriate.

If you’ve experienced substantial changes in revenue, profitability, employees, ownership, or future plans, ask your accountant whether your current entity structure should be reviewed.

Sole proprietorships, partnerships, LLCs, S corporations, and C corporations can have very different accounting and tax considerations.

Changing entities shouldn’t be done solely to chase a perceived tax advantage, but year-end planning is a good opportunity to discuss whether your current structure still supports your goals.

14. Create a Preliminary Budget and Cash-Flow Plan for Next Year

Fourth-quarter planning shouldn’t focus exclusively on taxes.

Use what you’ve learned this year to begin planning for next year.

Ask:

What do we expect revenue to be?

Are expenses likely to increase?

Will we need to hire?

Are major equipment purchases coming?

Do we anticipate borrowing money?

Are there months when cash flow is traditionally tight?

A realistic budget and cash-flow forecast can help you anticipate problems rather than reacting to them.

15. Schedule a Year-End Meeting with Your Accountant

Perhaps the most important item on the fourth-quarter checklist is also one of the simplest:

Talk to your accountant before the year is over.

Your accountant can’t help you evaluate a decision you didn’t discuss until after the deadline has passed.

Bring updated financial statements and information about significant changes that occurred during the year. Talk about what’s happening now and what you’re planning for next year.

The conversation should go beyond:

“How much tax will I owe?”

Consider asking:

“What should I be doing now to put my business in a better financial position next year?”

Don’t Wait Until Tax Season to Start Thinking About Taxes

January through April may be associated with tax preparation, but October through December can be some of the most valuable months for tax planning.

Getting your books in order, understanding your financial results, reviewing tax obligations, and discussing planning opportunities before December 31 can help you enter the new year with fewer surprises and better information.

At Albertjohn DePalantino & Company PC, we believe effective accounting and tax planning should be an ongoing process – not something that happens once a year when it’s time to file a return.

Our team works with businesses throughout Doylestown, Bucks County, Southeastern Pennsylvania, and beyond, providing bookkeeping, small-business accounting, payroll, tax preparation, tax planning, cash-flow management, and business advisory services.

Is Your Business Ready for Year-End?

Don’t wait until you’re gathering documents for your tax return to find out what you could have done before December 31.

Contact Albertjohn DePalantino & Company PC to review your business’s bookkeeping, financial position, and year-end tax-planning needs and start the new year with a clearer picture of where your business stands.