The fiscal year is the consecutive 12-month period during which a business or organization plans its budget. It does not have to be from January to December; in fact, most organizations opt to have their fiscal years end at the natural end of their business cycle. For example, retailers often select January 31 as the last day of the fiscal year; however, most businesses use the 12-month period beginning July 1.
Establishing the Fiscal Year
Begin your fiscal year on the first day of the month at the start of your business's natural cycle. July 1 is a common start date. If your business is steady throughout the year -- in other words, it doesn't experience busy and slow periods -- then January 1 is appropriate.
End your fiscal year 12 months after the start date (on the last day of the month). For example, if the start date is July 1, 2011, then the end date is June 30, 2012. This is abbreviated "FY12," short for "Fiscal Year 2012." The fiscal year abbreviation always uses the last two digits of the last year.
Begin the next fiscal year on the same start date. For example, in the fiscal year following FY12, FY13 will begin on July 1, 2012 and end on June 30, 2013.
Choosing a January 1 through December 31 fiscal year makes it easy to coincide with IRS tax reporting.
Don't end your fiscal year in the middle of an intense business cycle.
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