Fiscal Year EndLindsay Chambers
Every business must manage its finances, and understanding the fiscal year is a crucial component in accomplishing that objective. The fiscal year is an integral part of accounting and tax reporting, but its start and end dates may not always align with what you expect. Let’s demystify the fiscal year end and why it varies across different businesses.
What Is the Fiscal Year?
A fiscal year is any 12-month period companies use for accounting and tax purposes. It’s the foundation for reporting and evaluating financial performance and measuring year-over-year revenue and earnings. The IRS allows companies to be either calendar year or fiscal year taxpayers.
While it’s natural to assume the fiscal year aligns with the calendar year – starting on Jan. 1 and ending on Dec. 31 – that’s not always the case. Many businesses choose a different fiscal year end based on their unique needs.
Why Is the Fiscal Year End Different for Various Businesses?
The date that marks the close of the fiscal year can differ significantly from one organization to another, depending on factors like your business’ revenue cycle and auditing practices. Ideally, your company’s fiscal year should represent a complete operating cycle. Recording all related revenues and expenses within the same period makes financial statements more informative and meaningful.
For instance, a retailer might choose a fiscal year that ends shortly after the winter holiday season to account for the surge in sales. Similarly, a farming business might choose a fiscal year that aligns with the agricultural cycle.
Nonprofits – especially those that rely on grant funding – may coordinate their fiscal year with the timing of grant awards to better match their revenue with related expenses. Doing so also ensures they can accurately report how they used the funds within a given grant period.
Moreover, some small businesses with limited resources might choose a non-calendar fiscal year end to balance their workload. Sometimes, having a fiscal year end that falls outside the traditional tax season can make it easier to get auditing services.
Expert Tax Planning and Accounting for Small Businesses and Nonprofits
The fiscal year is a fundamental accounting concept that helps businesses organize, report and evaluate their financial performance. While understanding the fiscal year is crucial for accurate tax reporting and financial planning, busy business owners have other mission-critical tasks to focus on. That’s where we come in. At Clear View Business Solutions, our experienced professionals handle comprehensive bookkeeping, keeping your path to financial success transparent and removing any obstacles to your success.
If you face challenges with disorganized books, our friendly team is here to handle your financial records, offering additional supervision to ensure precision and avoid expensive errors. We offer full-cycle bookkeeping and review oversight to help you get control of your finances and provide expert advice. If you’re unsure about how to best set your fiscal year end or have any other questions, please reach out to us today.