Choosing a fiscal year end is a critical decision for any business. A fiscal year is a 12-month period that a company uses for accounting purposes. It does not necessarily align with the calendar year. Many factors must be considered when choosing a fiscal year end, such as the nature of the business, its industry, and its tax implications.
There are several benefits to choosing a fiscal year end that aligns with the natural business cycle. For example, a retailer may choose a fiscal year end that coincides with the end of the holiday shopping season. This allows the company to close its books and prepare its financial statements while business is slow. Another benefit of choosing a fiscal year end that aligns with the natural business cycle is that it can help to smooth out seasonal fluctuations in revenue and expenses.
