Businesses operate on a calendar that’s different from what you may already know. This is referred to as a “fiscal year,” or a 12-month period that companies use for accounting and tax reporting. Additionally, the completion of a fiscal year is known as the “year-end.” Businesses have the option to choose the best year-end for themselves, preferably with the guidance of professional accounting services in Brampton.
The importance of choosing the right fiscal year-end for your business
Unlike the standard calendar, which starts and ends on set months, a fiscal year can span any 12-month period. According to the Canada Revenue Agency, your first tax year-end date must fall within 53 weeks of your incorporation date.
Despite the increased flexibility, most companies still choose to follow the traditional calendar year and set their year-end date on December 31. Additionally, some corporations use the last day of the month closest to their 53-week deadline.
But why is it necessary for businesses to choose their fiscal year-end strategically?
- For better management
Does your business carry a lot of inventory? If so, it’s best to end your fiscal year at the time when your inventory is at its lowest. This will give you fewer items to count and an easier time spotting slow-moving inventory.
Additionally, scheduling your year-end around this time allows you to catch up on other business tasks, such as accounts receivable, outstanding balances, and returns.
- For better accounting practices
In Canada, professional corporations that are members of a partnership must set their fiscal year-end on December 31. Because of this, many businesses are racing to get their taxes done by the end of the year, keeping accounting firms busy.
So, if you are not required to have a December 31 year-end date and want to avoid the rush, consider ending your fiscal year on a different date. This will give you more access to high-quality accounting services in Brampton.
Need help choosing an appropriate year-end date for your business? Work with professional accounting services in Brampton and craft a strategic approach that will benefit your company in the long run.
