With 2025 right around the corner, what should you be doing to prepare? The turn of the year brings many important to-dos for small business owners, from goal setting to tax preparation. Whether you’re new to business ownership or just want a refresher, these eight essential steps can help you hit the ground running in January.
1. Check 2024 financial reports
The end of the year marks the end of a financial reporting period for most businesses. Being so, you’ll want to review the following key reports to gauge your performance:
- Balance sheet: Records your company’s assets, liabilities, and equity, and shows its overall net worth.
- Cash-flow statement: Tracks money flowing into and out of your business, along with how much you keep on hand.
- Profit and loss statement: Summarizes your business’s income and expenses over a specific period to show how much it profited or lost, regardless of when cash was received or paid out.
You can create financial statements manually in a spreadsheet but accounting software speeds up the process and reduces errors. For example, Lili auto-generates a variety of reports you can access on the platform anytime.
2. Reconcile your accounts
Reconciling accounts involves comparing your business’s bank statements and accounting records over a defined period to ensure they match. A year-end reconciliation is important to ensure that your company’s records are accurate before closing the books, filing taxes, and analyzing the year’s performance.
To perform bank reconciliation, gather your bank and accounting records for the previous year and compare them line by line. If any transactions don’t match, investigate why and make the necessary corrections. In the end, both balances should line up perfectly.
Tip: Lili’s real-time categorization of expenses enables quick reconciliations on an ongoing basis. You can keep your books up to date instantly with a simple swipe, which makes end-of-year reconciliations less prone to errors.
3. Audit your 2024 expenses
Businesses typically need to spend money to generate revenue, but overspending eats into your profitability. The end of the year is a good time to dig into your business expenses and analyze if you should make any cuts or adjustments.
To do so, pull up your expense report and budget from the current year. Review each category of expenses to see if you stuck to your budget. Consider the causes of overages or underages and note any changes you want to make for next year.
4. Review and update vendor contracts
Revisit your vendor partnerships and contracts. Consider if your vendors are meeting your expectations or if you’d like to shop around for other solutions. Additionally, review the terms and conditions of your vendor contracts.
A variety of situations can create the need for contract revisions such as if you’ve expanded your operations, restructured your organization, or encountered issues throughout the year. Along with pricing, consider updating terms such as performance expectations, delivery deadlines, contract duration, and compliance requirements.
5. Review payroll and benefits
If you have employees, review your current payroll and benefits. Adjustments may be necessary or beneficial for a variety of reasons, such as:
- Compliance: To stay compliant with labor laws and tax regulations.
- Market competitiveness: To offer competitive compensation that attracts top talent.
- Fairness: To ensure employees feel the compensation is fair and respects all employees.
- Organizational goals: To better align with changes to your company’s mission, vision, values, and targets.
Assess if your current benefits are valuable to your employees and if there are any new or better options on the market (e.g. mental health support, get paid early, etc.). Additionally, review employee salary and performance data, and perform market research to learn how your compensation compares to your competitors. If you uncover opportunities for improvement, plan to implement them in the upcoming year.
6. Set goals for 2025
A new year means new opportunities. To make the most out of 2025, start by analyzing your performance from 2024. The SWOT framework can be helpful in guiding you to assess your company’s strengths, weaknesses, opportunities, and threats.
Once you’ve evaluated where you stand, identify your priorities and set goals to achieve them. The SMART (specific, measurable, actionable, relevant, time-bound) framework can be a great guide.For example, if your goal is to increase revenue by 20% in the new year by expanding your customer base through targeted marketing efforts, here’s how it could look:
- Specific: Achieve a 20% year-over-year increase in revenue.
- Measurable: Track weekly and monthly revenue using Lili’s real-time reports.
- Actionable: Execute a targeted marketing strategy detailed in a comprehensive plan.
- Relevant: Revenue growth aligns with the company’s mission to expand its impact.
- Time-bound: Reach the goal within 12 months.
With clear targets, you can reverse engineer action plans, providing a road map to success for you and everyone on your team.
7. Prepare your 2025 budget
Another critical step is preparing your budget. Forecast your revenue and estimate your fixed, variable, and total expenses for each month of the upcoming year. The main aim is to accurately predict your costs and ensure you have sufficient cash flow to cover them. Additionally, consider your goals and if they require any budget adjustments. For example, if you’re looking to build a business savings, you’ll want to save a defined amount of revenue each month.
8. Organize 2024 tax documents
Lastly, for businesses using the calendar year, it’s time to start thinking about taxes. By preparing early, you can avoid last-minute stress and the penalties that come with missed deadlines. Start by identifying the tax forms you’re required to submit and their filing deadlines. Additionally, find the reports containing the financial information you need to complete the forms.
The IRS has all the federal tax forms you need on its website while your state tax department should have the forms you need for state taxes. Lili can also help you fast-track the process by automatically filling out IRS tax forms for you (including Form 1065, Form 1120-S, and Schedule C).
Start the new year off strong
Ready to start 2025 off on the right foot? By completing these eight year-end financial tasks, you can gain clarity on where your business stands and close your books with confidence. Additionally, you’ll be prepared for a successful year ahead with goals, an action plan, and an optimized budget.
If you’d like help, Lili’s all-in-one banking and accounting platform for small business owners can do much of the heavy lifting. From automating expense tracking and account reconciliations to generating pre-filled tax forms and providing detailed financial insights, it’s designed to seamlessly handle the tedious work so you can focus on higher-level tasks.
Start your year off right – try Lili free for 30 days and take the stress out of managing your business finances.
Accounting, tax preparation and invoicing software is available to Lili Smart and Lili Premium account holders only; applicable monthly account fees apply. For details, please refer to your Sunrise Banks Account Agreement.
Lili is a financial technology company, not a bank. Banking services are provided by Sunrise Banks, N.A., Member FDIC.
