Nothing wrecks your January cash flow faster than overspending in December just because you felt like your team deserved a bonus… or someone told you it was good for a tax write-off.

Before you start planning gifts, bonuses, and champagne toasts, let’s pause and look at your numbers. Here’s how to know for sure if you’re financially ready to give generously without hurting Q1 of 2026.

✅ Step 1: Check Your Numbers, Not Just Your Gut

Don’t just rely on how your business feels this month. One big sale or a strong Q4 doesn’t equal a green light for bonuses.

Pull your year-to-date Profit & Loss report, and check:

• Month-over-month trends: Are you consistently cash flow positive?
• Year-over-year data: Did your business grow or just survive?
• Overhead % vs Revenue: Are bonuses going to be more than your sales?

✅ Step 2: Forecast Quarter 1, 2026

Bonuses feel great in December. But when January slows down, do you still feel secure? Let’s make sure Q1 doesn’t surprise you.

Here’s what to review:

🗓️ Historical Q1 Trends

•         Was revenue low in Jan–March last year?
•         Did COGS or payroll spike early?

📦 Upcoming Expenses

•         Annual software, insurance, property tax, or franchise fees
•         Payroll increases, hiring costs, or seasonal wage changes

📉 Seasonal Patterns

•         Are you in a slow-start industry (construction, events, retail)?
•         Does income dip before spring?

📈 Growth Plans

•         Launching anything new?
•         Hiring, expanding, or investing in systems?

✅ Step 3: Look at Your Cash Flow, Not Just Profit

You can look profitable and still not have the cash in the bank to pull from to cover your expenses. Plus, bonuses come with a high tax rate, which you need to be sure to budget for too!.

If you’ve ever said, “I don’t know if I can afford bonuses…” this is your sign to review your STOP bank accounts to make sure your cash flow will be ok when you pay out the bonuses:

• Savings: 3–6 months of business reserves
• Taxes: Up to date on quarterly or year-end tax transfers
• Operations: Do you have enough to cover one month of expenses in your account?
• Profit Sharing: If you don’t have a Profit Sharing account set up, now is the perfect time to start one. I recommend transferring 1% of gross revenue into the account every 2 weeks.

👉 Giving year-end bonuses should come from your Profit Sharing bucket, not your Taxes, Savings, or Operations bank accounts.

✅ Step 4: Manage Employee Expectations

It’s okay not to give a bonus this year if the business can’t support it.

Be honest with your team. Set clear expectations now, versus at year end when they are hoping and expecting a bonus. A smaller bonus that protects job security is better than a big check that leads to layoffs later.

And if you do give bonuses, share with your team how it was calculated and how their performance helped create it. Transparency builds trust.

🧡 Final Thoughts from Your Favorite Bookkeeper

Giving a $10,000 bonus in December and realizing you’re short $10,000 in February? That’s the worst feeling ever and it is how negative cash flow spirals start.

Bonuses should be a celebration of current and future success. Your employees would much rather have a steady paycheck than a bonus that eventually leads to layoffs or pay cuts.

Too often, business owners give from a place of hope, appreciation, and joy while avoiding the future strategy. Let’s change that for you.

📊 At My CFO, we help you forecast Q1 while you’re still in Q4. We review trends, update your STOP Method™ transfers, and help you set a bonus strategy that’s generous and smart.

👉 Hire us to be your bookkeeper

We will walk you through each of these steps, helping you feel confident and empowered with your decision.

Because at the end of the day, cash flow isn’t luck, it’s strategy.