Starting the Year Right: A Financial Health Check for Growing Companies

Close the prior year properly

Before thinking about the year ahead, make sure the year just ended is properly closed. All bank accounts reconciled, all transactions posted, all accruals made, all year-end adjustments complete. The prior year's books should be locked before you move forward. Running both years open simultaneously creates confusion and errors.

Closing the prior year properly is the foundation for a good new year. All bank accounts reconciled to December 31. All accrual entries posted. All fixed asset additions recorded with proper depreciation. Tax returns filed or in progress. The goal is that the balance sheet at year-end ties to reality and the P&L reflects the full year's performance.

Common year-end cleanup items that get overlooked: inventory count and adjustment, final accrual review for bonuses and year-end payroll items, fixed asset disposals or retirements, bad debt review and write-offs, intercompany reconciliation. Each of these is a common source of year-end adjustments that get missed in rushed closes.

Assess your financial position

With the prior year closed, run a clear-eyed assessment: what was your revenue growth, what were your margins, where did you beat or miss your plan, and what's your current cash position and runway? This assessment should be honest rather than optimistic, the purpose is to start the year with an accurate picture, not a flattering one.

The January financial health check: pull the year-end balance sheet. Look at cash, AR, AP, any debt. Look at equity and retained earnings. Do these numbers match what you expect? If something is significantly off, dig in before the new year gets busy. Balance sheet issues at year-start compound throughout the year if not addressed.

Also look at the P&L trajectory. Did revenue grow as expected? Did margins hold up? Did expenses track to plan? The answers to these shape the next year's planning assumptions. A year that ended with margin compression, for example, suggests different planning than a year that ended with margin expansion.

Review your cost structure

January is a good time to review recurring costs: software subscriptions, vendor contracts, retainers, and recurring services. Businesses accumulate costs over time that outlive their usefulness. A systematic review of every recurring expense and whether it's still delivering value is a straightforward way to free up cash without cutting anything that matters.

Cost structure review is the highest-impact January activity. Pull every recurring expense, software, vendors, contractors, subscriptions. Sort by annual cost. For each line over $10K/year, ask: is this still needed, can it be negotiated, is there a better alternative. The cumulative savings from a rigorous review often exceed $50K annually for mid-size companies.

Also review variable costs. Did shipping costs rise faster than revenue? Did payment processing fees take an unusually large share of revenue? Did legal fees grow without apparent reason? Each answer tells you something about where cost discipline is working and where it is not.

Set up your financial cadence for the year

The financial habits you establish in January tend to persist through the year. Set up your monthly close schedule, when will books be closed each month? Schedule your quarterly financial reviews. Build your annual budget and the reporting cadence that will tell you whether you're on track. The businesses that end the year in strong financial shape are the ones that start it with these structures in place.

The financial cadence for the year should be set in January: when monthly close lands, when financial reports go to leadership, when board meetings are scheduled, when forecasts are updated, when quarterly reviews happen. Publishing this calendar to leadership sets expectations and reduces the one-off requests that disrupt finance work.

Also set the standards for what each monthly close includes. Reconciliations complete, variance analysis written, specific reports produced. Having this documented prevents the close from degrading over the year as new priorities emerge. The first month that a standard gets dropped is usually the first of many. Write down the standards in January and hold the line.