First Things to Do in Accounting and Bookkeeping for Your Small Business at the Start of the Year
January marks a fresh start and critical opportunity to establish financial practices that will serve your business all year long. The actions you take in the first month set the foundation for organized books, accurate reporting, and strategic financial management. Here's your comprehensive start-of-year accounting checklist.
Close Out the Previous Year Properly
Finalize December and Annual Books
Critical First Steps:
Reconcile all bank and credit card accounts through December 31st
Categorize all remaining transactions from previous year
Review and reclassify any miscategorized expenses
Ensure all December invoices and bills are recorded
Generate final annual financial statements
Why This Matters: You cannot accurately plan for the new year without knowing exactly how the previous year ended.
Deadline Awareness: Complete this by January 15th to allow time for tax preparation.
Generate Year-End Financial Reports
Essential Statements:
Annual Profit & Loss Statement (full year and by quarter)
Balance Sheet as of December 31st
Cash Flow Statement for the full year
Year-over-year comparison reports
Individual monthly P&L statements for trend analysis
Strategic Value: These reports reveal patterns, profitability trends, and areas needing attention in the new year.
Handle Tax Compliance and Reporting
Preparation Tips:
Use payroll software automation when possible
Double-check amounts against annual records
Allow time for corrections before deadline
File electronically for faster processing
Gather Tax Preparation Documents
Organize for Your Accountant:
Annual financial statements
Bank and credit card statements
Loan documents and interest statements
Property tax records
Major equipment purchase documentation
Vehicle mileage logs
Receipts for significant expenses
Pro Tip: Create a dedicated "Tax Prep" folder (digital or physical) and compile everything your CPA will need.
Schedule Estimated Tax Payment (If Applicable)
Q1 Estimated Taxes:
Due date: January 15th for Q4 previous year
Calculate based on projected current year income
Set reminders for quarterly payments (April, June, September, January)
Review payment amounts with accountant
Set Up Your New Year Systems
Update Accounting Software for New Year
System Preparation:
Create new fiscal year if your software requires it
Archive previous year data appropriately
Update chart of accounts for any structural changes
Verify bank feed connections are active
Test integrations with other business software
Clean Slate: Start the year with properly configured systems to avoid mid-year complications.
Review and Update Chart of Accounts
Organizational Improvements:
Remove unused or duplicate accounts
Create new categories for new business activities
Standardize naming conventions
Organize accounts logically for reporting
Document account usage for consistency
Example Changes: If you started e-commerce in December, create proper revenue and expense categories for online sales.
Establish Filing and Organization Systems
Document Management:
Create monthly folders (January-December)
Set up cloud storage with backup systems
Establish receipt scanning routines
Create expense documentation procedures
Implement digital-first workflows
Create Financial Goals and Budgets
Develop Annual Budget
Budget Components:
Revenue projections by month and quarter
Fixed expense allocations (rent, insurance, salaries)
Variable expense estimates (marketing, supplies, travel)
Capital expenditure planning (equipment, vehicles)
Cash reserve goals and emergency fund targets
Realistic Planning: Base projections on previous year performance with strategic growth assumptions.
Set Financial KPIs and Metrics
Key Performance Indicators:
Target profit margins (gross and net)
Revenue growth goals (percentage increase)
Expense ratio targets (operating expenses as % of revenue)
Cash flow objectives (minimum cash balance, days cash on hand)
Customer metrics (acquisition cost, lifetime value)
Monthly Tracking: Establish a dashboard or tracking system to monitor progress against goals.
Plan for Major Expenses and Investments
Strategic Capital Planning:
Equipment replacement or upgrade schedule
Technology investments and software needs
Marketing campaign budgets
Hiring plans and salary increases
Facility improvements or expansion
Cash Flow Consideration: Spread major purchases throughout the year to avoid cash crunches.
Establish New Year Routines and Processes
Implement Daily Bookkeeping Habits
Daily Discipline (10-15 minutes):
Review bank account balances
Record transactions immediately
Photograph receipts on the spot
Monitor accounts receivable for new payments
Check for unusual or fraudulent activity
Consistency Principle: Daily habits prevent overwhelming monthly catch-ups.
Set Monthly Bookkeeping Calendar
Recurring Monthly Tasks:
First week: Reconcile previous month accounts
Second week: Generate and review financial statements
Third week: Accounts receivable follow-up and invoicing
Fourth week: Budget vs. actual analysis and planning
Monthly: Back up all financial data
Calendar Integration: Add these as recurring calendar events with reminders.
Schedule Quarterly Reviews
Strategic Check-ins:
Comprehensive financial statement review
Budget vs. actual performance analysis
Tax planning consultations with accountant
Business goal progress assessment
Financial process improvement discussions
Review and Optimize Business Practices
Evaluate Pricing Strategy
Annual Price Review:
Calculate true cost of goods/services (including overhead)
Compare pricing to competitors and market rates
Assess whether current pricing is profitable
Plan price increases if needed (communicate to clients early)
Consider value-based pricing opportunities
Profitability Focus: Many businesses undercharge—ensure your pricing supports actual profit goals.
Audit Subscriptions and Recurring Expenses
Cost Optimization:
Review all software subscriptions (are you using them?)
Evaluate service provider contracts (can you negotiate better rates?)
Assess insurance policies (shop for competitive quotes)
Examine utility and phone plans
Cancel unused memberships or services
Savings Potential: Most businesses can reduce recurring expenses by 10-20% through annual audits.
Update Business Banking and Financial Relationships
Account Optimization:
Review bank account fees and features
Negotiate better merchant processing rates
Assess credit card rewards programs alignment with spending
Evaluate business credit line needs
Shop for better interest rates on loans
The Bottom Line
Starting the year with intentional accounting and bookkeeping practices creates momentum that carries through all twelve months. These first actions establish organization, compliance, and strategic clarity that separate thriving businesses from merely surviving ones.
Key Insight: January preparation time is leverage—every hour invested in setup saves 5-10 hours throughout the year.
Action Priority: Focus first on closing previous year properly, then build new year systems and routines. Don't skip the foundation to jump ahead.
Begin the year organized, and you'll end it profitable and prepared for whatever comes next.