Business Finance

The Essential Financial Checklist Every Business Should Use Year-Round

Managing the financial side of a business can be tricky, but it doesn’t have to be. A solid checklist to follow throughout the year can keep things running smoothly. This checklist doesn’t have to be complex—it’s about staying organized and making sure you’re taking the right steps consistently.

1. Organize Your Books

Keeping your books in order is the foundation of financial health. If you haven’t done so already, set up an accounting system. You don’t need fancy software right away; something simple like QuickBooks or even a spreadsheet will do. The key is regular, accurate updates.

Key Tasks:

Track all income and expenses.
Ensure every transaction has supporting documents (invoices, receipts, etc.).
Categorize your expenses for easy reporting (e.g., office supplies, utilities, travel).
Reconcile your bank statements every month to catch discrepancies early.

2. Keep an Eye on Cash Flow

Cash flow is the lifeblood of your business. Even profitable businesses can run into trouble if cash flow isn’t properly managed. This means you should always know how much cash you have, how much is owed to you, and when bills need to be paid.

Key Tasks:

Prepare a monthly cash flow forecast. This helps you predict when money will come in and go out.
Review your accounts receivable regularly and follow up on late payments.
Set up automatic payments for regular expenses to avoid late fees.
Keep a buffer in your bank account for unexpected costs.

3. Track Taxes

Tax planning should not be a once-a-year affair. If you wait until the end of the year, you could end up with a huge bill or missed deductions. Set aside time throughout the year to track and plan for taxes.

Key Tasks:

Understand your tax obligations: federal, state, and local.
Set aside a percentage of income for taxes to avoid scrambling later.
Keep records of business deductions, like office space, equipment, and travel expenses.
Regularly consult with your tax professional to ensure you’re on the right track.

4. Budgeting for the Future

A budget helps keep your spending in check and allows for planning ahead. Without it, it's easy to overspend or miss opportunities to save for the future.

Key Tasks:

Set realistic, short-term and long-term financial goals.
Create a budget that includes all expenses: payroll, rent, utilities, and marketing.
Revisit the budget regularly. Adjust if there’s a significant change in income or expenses.
Monitor the actual performance against the budget to identify where you’re overspending or saving more than expected.

5. Maintain a Profit and Loss Statement

A Profit and Loss (P&L) statement tells you how your business is doing financially over a period of time. It should be updated regularly—monthly or quarterly.

Key Tasks:

List all your revenue streams.
Subtract costs (direct and indirect) from your revenue to calculate profit.
Look for trends over time—are certain costs rising too quickly? Is your revenue growing?
Compare your actual P&L with your budget to spot discrepancies early.

6. Review Your Debt

Many businesses take on debt to grow, but it’s important to manage that debt wisely. Review it regularly to ensure it doesn’t get out of hand.

Key Tasks:

List all business loans, credit lines, and other debts.
Track repayment schedules and interest rates.
Prioritize paying off high-interest debt first.
Consider refinancing options if it lowers your payments or interest rates.

7. Protect Your Business with Insurance

Insurance is often one of the last things business owners think about, but it’s essential to protect yourself against unexpected events. Your insurance needs will change as your business grows, so you should check them periodically.

Key Tasks:

Review your current insurance policies to ensure they cover your current operations.
Consider general liability, property, and worker’s compensation insurance if you don’t have them.
Explore health insurance options for your employees.
Reassess coverage after significant changes to your business, such as new locations or hires.

8. Pay Yourself

As a business owner, you might feel like the last person who deserves to be paid. But, paying yourself consistently is key to both your personal financial health and your business's stability. Your salary should reflect the work you do and the value you bring to the business.

Key Tasks:

Set a regular salary or withdraw a set amount for personal expenses.
Don’t dip into business funds for personal use—separate your personal and business finances.
Adjust your salary if the business is doing better or worse than expected.

9. Build a Business Emergency Fund

Running a business always involves risk. Unexpected events can disrupt your cash flow—whether it’s a natural disaster, economic downturn, or key client dropping off. A business emergency fund will help you weather those storms without resorting to credit cards or loans.

Key Tasks:

Aim to save three to six months’ worth of operating expenses.
Keep the fund in a separate, easily accessible account.
Replenish the fund if you have to dip into it.

10. Plan for Retirement

It might seem far off, but retirement planning should start as early as possible. You’ll want to have money set aside for your future and for the future of your employees, too.

Key Tasks:

Consider a retirement plan that suits your business size, such as a SEP IRA, Simple IRA, or 401(k).
Offer retirement savings options to employees if you have them.
Review retirement savings goals annually to ensure you’re on track.

11. Review Financial Statements Regularly

It’s easy to get caught up in the day-to-day running of the business and forget about the big picture. Regularly reviewing your financial statements is the best way to stay on top of things.

Key Tasks:

Set a schedule to review your financial statements (P&L, balance sheet, and cash flow) monthly or quarterly.
Look for red flags like declining revenues, rising costs, or unhealthy debt levels.
Use these reviews to make informed business decisions, such as adjusting prices, cutting costs, or taking on new debt.

12. Reevaluate Your Pricing

Your pricing strategy directly impacts your profit margins. It’s important to regularly evaluate whether your prices are still in line with your costs, market demand, and competition.

Key Tasks:

Compare your pricing with competitors.
Adjust for inflation, rising costs, or increased demand.
Consider offering discounts or promotions to drive sales without hurting your bottom line.

13. Prepare for Financial Audits

Whether you’re audited by the IRS or another party, it’s important to have your records in order. You can avoid stress and penalties by preparing well in advance.

Key Tasks:

Keep all your business records organized and up-to-date.
Regularly back up financial data and documents.
Consider hiring an auditor or accountant to help ensure your records are audit-ready.

14. Monitor Your Key Performance Indicators (KPIs)

To truly understand how your business is performing, track a set of Key Performance Indicators (KPIs) that are relevant to your goals. These could include revenue growth, customer retention, or profit margins.

Key Tasks:

Set clear KPIs based on your business’s financial and operational goals.
Review your KPIs monthly or quarterly.
Adjust your strategy if certain KPIs are not meeting expectations.

Conclusion

Financial health is about more than just tracking your income and expenses. It’s about taking proactive steps to manage debt, prepare for taxes, and ensure long-term stability. By staying on top of these tasks year-round, you’ll be setting your business up for lasting success.

The Essential Financial Checklist Every Business Should Use Year-Round