Fiscal Year-End

What is the fiscal year-end?

The fiscal year-end refers to the completion of a company’s 12-month financial accounting cycle. The fiscal year-end doesn’t always align with the calendar year-end. 

Companies have the right to establish their own fiscal year beginning and end dates, often determined by their peak business times. Once they choose their fiscal year, it must remain the same to avoid any bookkeeping confusion. 

At fiscal year-end, companies produce financial statements. These statements are sent to the IRS. Public companies must also report their statement to the U.S. Securities and Exchange Commission (SEC). Financial close software helps companies stay organized when closing their books.

Software de Fiscal Year-End

Software que menciona fiscal year-end como recurso ou termo.

TValue

FloQast

Donorbox

Fiscal year-end examples

Companies sometimes select a fiscal year instead of a calendar year cycle. Some examples of fiscal year-end in various industries include:

• Retailers. Many retailers use a calendar cycle from February 1 to January 31. This allows them to get through the busy and profitable holiday season before producing financial statements.
• Government. The federal government starts its year on October 1, which means the fiscal year-end is on September 30.
• Schools. For colleges, universities, and K-12 school districts, it usually makes sense for the fiscal year-end to coincide with the academic calendar year-end. Many institutions opt for a July 1 start and June 30 end. 
• Seasonal. Companies that operate seasonally, such as fireworks companies, landscapers, or snow removal services, often end their fiscal years after peak season. For example, the landscaping company might close its books on September 31.

Benefits of selecting a fiscal year-end

New companies often feel conflicted about whether to match their fiscal year with the calendar year. Some advantages of choosing a fiscal year-end include:

• Avoiding tax burdens. Companies that receive regular capital investments want to spend them in the same fiscal year to avoid tax burdens. Opting for a fiscal year-end lets them plan strategically for these occurrences.
• Simplifying competitor analysis. By ending their fiscal year at the same time as the competition, businesses can more accurately compare numbers within their industry.
• Skirting the busy period. If the calendar year-end falls during the busy season, it complicates work for in-house accounting departments. Many companies select a fiscal year-end to prevent this.
• Receiving more attention from accountants. Many organizations choose a calendar year-end for simplicity’s sake, which means they must hire accountants during the busy tax and audit season. By selecting a fiscal year-end outside of January to April, companies may get more attention from their tax preparation group.

Documents needed for fiscal year-end

Companies must have all of their paperwork gathered in one place at fiscal year-end. Easy access to essential documents makes the accountant’s job quicker and more straightforward. Documents to keep close at hand include the following: 

• Profit and loss statement. Also known as an income statement, this document shows sales and expenses. In addition to giving the business a “big picture” glance at its financial health, it’s helpful when filling out tax forms. 
• Balance sheet. This document details assets, like cash, inventory, liabilities, debts, as well as property in the company’s possession. The balance sheet also lists shareholders’ equity, the net value of the company once its liabilities are subtracted from its assets.
• Cash flow statement. This is a detailed record of how cash is made and spent. The company and its accountants use the cash flow statement to make short-term spending decisions and verify the amount of cash gained or lost over the year, known as the net cash flow.
• Invoices. Access to invoices provides additional insight into the company’s methods for generating income. Shortly before fiscal year-end, companies should reach out to accounts with unpaid invoices to encourage them to pay.
• Receipts. Physical or digital receipts for transactions prove how the business spent its money. It also makes it easier to find qualifying tax write-offs. 

Depending on the business, an accountant may need other items to close out the books, such as payroll records and loan information. 

Fiscal year-end best practices

Accounting teams may face difficulties managing the close of one fiscal year and preparing for the start of another. Here are some best practices that can help:

• Create a closing checklist. Some team members might already have their own lists. Consolidating these into a single shared document simplifies the process. A closing schedule should explain the essential steps for closing out the year, plus the deadline and responsible party for each task. Financial close software can create these checklists for companies to put everyone on the same page.
• Locate missing receipts and invoices. Staying on top of paperwork and documentation throughout the fiscal year makes closing less stressful. Companies should make sure they have everything they need before the fiscal year-end.
• Review assets and inventory. Organizations should account for all fixed assets, and if necessary, do a final count of physical inventory. These steps are time-consuming, so businesses must allow plenty of time to complete them.
• Complete reconciliations. Accounting teams should reconcile all balance sheet accounts. If they find any discrepancies, they must make adjustments to ensure accurate financial statements.

Need help managing the books? Accounting software can help make a fiscal close less stressful.