Mid-Q1 Financial Checkup: Why Small Businesses and Nonprofits Should Review Their Books Now
As we move through the early part of the year, many organizations shift their focus away from year-end wrap-up and toward the months ahead. For small businesses and nonprofits alike, this is actually one of the most valuable times to pause and conduct a mid-Q1 financial checkup. It’s a simple but powerful practice that can help you avoid surprises, strengthen cash flow, and make better decisions before the year gains momentum.
From an accounting perspective, the first quarter often sets the tone for the entire year. Here are a few key areas we recommend reviewing right now.
1. Confirm That Year-End Closing Is Truly Complete
Even after the books are “closed,” it’s common for a few loose ends to remain—late invoices, uncategorized expenses, or adjustments related to payroll, benefits, or grants. Taking time now to confirm that everything is finalized ensures your financial reports are accurate.
For small businesses, this might include:
Reconciling all bank and credit card accounts
Reviewing accounts receivable and following up on overdue invoices
Ensuring all vendor bills from the prior year were recorded
For nonprofits, an additional step is confirming that:
Grant income is recorded correctly
Restricted vs. unrestricted funds are properly categorized
Program expenses are allocated accurately
Clean books early in the year make budgeting and forecasting far more reliable.
2. Evaluate Cash Flow Trends (Not Just Profit)
One of the most common issues we see with small organizations is confusing profitability with available cash. A business can show a profit on paper but still struggle to cover expenses if receivables are slow or costs increased early in the year.
Right now is a great time to review:
How long customers or donors typically take to pay
Monthly fixed expenses versus expected income
Seasonal trends that might impact the next few months
For nonprofits especially, funding timing can create gaps between when money is awarded and when it arrives. Planning for these gaps now can prevent operational stress later.
3. Review Compliance and Filing Deadlines
Early in the year, there are several important reporting and compliance requirements that organizations should double-check. Missing a deadline can result in penalties or unnecessary administrative headaches.
Organizations should confirm they have:
Filed or prepared required information returns (such as 1099s, if applicable)
Updated payroll records and tax filings
Maintained proper documentation for deductions and expenses
If you work with federal taxes or reporting, guidance from the Internal Revenue Service can change periodically, so it’s worth ensuring your processes reflect current requirements.
4. Revisit the Budget With Real Data
Budgets created late last year were based on expectations. Now you have actual numbers from the first month or two of the year. This is the perfect time to compare projections with reality.
Ask questions such as:
Are revenue targets realistic based on current performance?
Are expenses trending higher than expected?
Do we need to adjust spending or fundraising strategies?
For nonprofits, this step can also highlight whether program funding levels align with operational costs. Adjusting early helps maintain stability throughout the year.
5. Strengthen Financial Processes
Early in the year is also ideal for improving systems that support financial accuracy and efficiency. Many organizations wait until something goes wrong before tightening processes—but proactive improvements can save time and reduce risk.
Consider evaluating:
Approval processes for expenses
Documentation requirements for reimbursements
How frequently financial reports are reviewed by leadership
Internal controls that help prevent errors or fraud
For nonprofits, board oversight of financial reports during the first quarter can also set strong governance practices for the year.
6. Set Financial Priorities for the Next Two Quarters
After reviewing your numbers and processes, the final step is turning insight into action. Organizations that revisit financial strategy early in the year often find it easier to stay on track.
You might decide to:
Build a larger operating reserve
Adjust pricing or service offerings
Improve collections processes
Plan upcoming capital purchases
Strengthen donor or funding diversification
Even small adjustments now can have a meaningful impact by the middle of the year.
A mid-Q1 financial review may not sound exciting, but it’s one of the most effective ways to maintain stability and confidence in your organization’s financial health. Small businesses and nonprofits that take time to evaluate their financial position early often find themselves better prepared for growth, challenges, and opportunities throughout the year.
If you’re unsure where to start, working with an accounting professional can help identify the most valuable reports and metrics for your specific organization. The goal isn’t just accurate books—it’s using your financial information as a tool to guide smarter decisions all year long.