When you set up your small business, you may have the chance to choose your fiscal year. Your budget and financial reports are based on this 12-month period. Although many companies choose a fiscal year that coincides with the calendar year, you can capitalize on some benefits by opting for a noncalendar fiscal year. This unnatural fiscal year can more accurately match your revenue and expenses. If you incur expenses in November for an event that will raise money in January, this single event would be split between two calendar-based fiscal years. You want your revenue earned to be in the same reported period as your expenses for tax purposes. By changing the fiscal year, you can deduct the expenses against your revenue to minimize your tax liability. This also makes the most sense for budgeting and internal reporting. You would be able to analyze how your business is doing if all related transactions occurred within the same fiscal year. If you operate on a noncalendar year, your deadlines will not line up with most other companies. This gives you better access to resources and individuals outside of your company. You’ll have more opportunities to meet with and speak to your vendors, suppliers, customers, and government contacts if your fiscal year ends in July because these parties will not be as busy. Your external accountant may even offer lower rates for unnatural fiscal years because you may be using its services during slow periods. There are several criteria a small business must meet before it can change its fiscal year, but electing to do so can create many benefits for your business.
2017-03-08 00:00:00 2017-03-08 00:00:00 https://quickbooks.intuit.com/ca/resources/bookkeeping/opting-for-unnatural-fiscal-year Bookkeeping English Understand the benefits of electing an unnatural fiscal year that does not align with a calendar year ending in December. https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Bakery-owner-in-small-business-store-room-poses-for-photo-discussing-fiscal-year-earnings.jpg Opting for an Unnatural Fiscal Year
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.