If you run a small business with employees, you’ll want to get comfortable with the idea of a quarterly calendar to keep track of your income, losses and taxes. By dividing your business year into four quarters, you can more effectively manage and assess your company’s financial strengths and weaknesses, improving your overall profit margin. For a publicly traded company, the information released in a quarterly financial report can have a significant effect on the actions of its investors.
A business calendar quarter is equivalent to three months. Breaking your business calendar into three-month quarters helps you to stay on track, stay on budget and be more profitable.
What Are the Quarterly Months?
Every business and governmental agency functions and manages its accounting and finances according to a specific business calendar. To keep track of important financial information such as profits, income, losses and expenses, some companies organize and assess this information in terms of calendar quarters.
What does a quarterly calendar mean? A calendar quarter is equivalent to three months. For example, the first three months of the year – January, February and March – make up the first quarter of the calendar year. The remaining quarters are:
- Second quarter: April, May and June
- Third quarter: July, August and September
- Fourth quarter: October, November and December
Business quarters are especially important for companies that are publicly traded or those that have shareholders. Investors and analysts rely on the quarterly financial statements of such companies to guide them in making investment decisions and financial forecasts. A company's quarterly reports can affect the company's stock price, serve as an indicator of the overall health of the company and be used as an indication of where the company is heading financially.
When you set out to do your planning for the year, it is helpful to think in terms of a three-month calendar whether or not you are publicly traded. That means any marketing, projects, sales projections and trips should be divided into quarters and not just slated for “sometime this year.” Planning your business activities this way helps you to better plan and organize, allocate money and resources and spread activities throughout the year in a way that makes sense.
It can also help to look at reports quarterly rather than annually so you can modify and adjust as needed. If you realize in the second quarter that something at your company isn’t working as well as expected, you can make changes and review the results in the fourth quarter, for example. This can give you a better sense of how your company is performing on an ongoing basis without waiting until the end or beginning of the year.
When Does the Quarter End?
What does the quarter end of a three-month calendar mean? Each quarter ends on the last day of the last month of the three-month calendar. For instance, the first quarter ends on March 31, and the second quarter ends on June 30.
That means any reports submitted for each quarter must go up to and include that date. Quarterly reports and taxes are typically due in the middle of the month following each quarter’s end. If the due date ends up being a weekend or legal holiday, the deadline moves to the next business day.
Failing to submit any tax payments by the quarterly deadline will result in late payment penalties. The actual penalty depends on how late you are, with fees increasing the later you are with payment. Many states have a late payment penalty and interest calculator on their websites so you can have an idea of how much you owe in penalties and fees.
It’s a good idea to have a quarterly reminder for when any payments or required reports are due and to update numbers and information throughout the year so you aren’t scrambling to get everything done at each three-month calendar deadline.
If you run a small business that does not have employees, you are not required by the IRS to file any quarterly reports. You may still want to keep a three-month calendar internally so you can keep ongoing tabs on your income, losses, expenses and other business markers. You may also opt to pay taxes quarterly if it makes more sense for you so that you can spread your tax obligations throughout the year.
What Reports Are Submitted Quarterly?
When you run a small business that has employees (whether only a few or dozens), you must report wages, tips and compensation paid to your employees to the IRS and your state. You must also pay taxes to both the IRS and your state, typically on a quarterly basis. If your business is one that is subject to excise taxes, you must also file those quarterly. Your state may also require other items to be submitted quarterly depending on your industry.
Each quarter, you must submit and pay your quarterly federal and state tax returns. Many states and the IRS let you file and pay your quarterly taxes online as well as amend quarterly reports. Some states even help you calculate your quarterly payments online and choose a specific payment date that works best for your company.
Keeping track quarterly of your company’s taxes, Social Security and other benefits and employee wages helps to keep you organized and on track throughout the year. Throughout the quarter, be sure to keep track of your profits, losses, wages and other expenses, and set aside enough money each quarter to pay your estimated taxes. Spreading your tax payments throughout the year in quarterly increments avoids having to submit a large tax payment at the end of the regular tax year.
It may be helpful to consult with a tax professional or accountant to make sure you have everything set up correctly and to work out a system that makes sense for your business. It’s better to set this up as early as possible to ensure that you are up to date with the latest tax code and that your business won't have any surprises during tax time.
What Is a Fiscal Year?
The exact months that constitute a given company's business quarter are determined by the start of the company's fiscal year. What does the fiscal year for a three-month calendar mean? For most companies, the fiscal year, or budget year, ends at the end of either June or September, which makes July 1 or October 1 the start of each respective financial year.
For example, if a company uses a fiscal year that begins on July 1, the first three months of the company's business calendar would be July, August and September, which would also be the first quarter. The other quarters would follow accordingly. Many companies that run more seasonal businesses opt to use a fiscal calendar instead of a traditional calendar year.
While it may seem like a lot of extra effort to break your business activities, tax payments and reporting into quarters, there are many benefits for your business. You can better control expenses and unnecessary costs and see more quickly where you are getting the best results. Instead of waiting for year-end results, you can make adjustments to your business throughout the year that can result in a more successful company and more profits in the long run.