Confused About How to Determine Your Company’s Fiscal Year-end Date? Read on to Find Out!

A consecutive period of 12 months that is used by governments and businesses for the purpose of accounting, budgeting, as well as tax reporting purposes is what you can call a fiscal or financial year. A fiscal year can be initiated on any date, unlike a standard calendar year – January 1 to December 31, depending on the needs of the organization or regulations of a country. For the complete details about the fiscal year, you must contact the best tax accountant in Mississauga. 

The fiscal year for your small business depends on your role – a corporation or a sole proprietor. For the fiscal year of sole proprietorships and partnerships, you must follow the standard calendar year, which ends on December 31. The deadline for your personal income tax return – T1, including business income, is typically due by June 15. Any taxes owed ought to be paid by April 30 in order to avoid any interest charges. In case your business is incorporated, then you have more flexibility. You may choose any period of 12 months for your fiscal year. You need to choose your first fiscal year end within 53 weeks from the date of incorporation. The majority of corporations choose the last day of a month, which could be March 31, June 30, or December 31, in order to simplify the bookkeeping. It is advised to align your GST/HST reporting periods with your corporate fiscal year-end in order to streamline your filings with the CRA – Canada Revenue Agency. 

Is it mandatory to have a particular fiscal year by law? 

As per CRA, you need to report your business income on an annual basis by law. For a business, a fiscal year can not be longer than 53 weeks, that is, 371 days. It is compulsory for every business to provide an end-of-fiscal-year return to the CRA. 

You should know that a fiscal year is significant for businesses for the purpose of showing financial stability.  Many small businesses start looking for loans for this purpose. They require their financial statements to prove the financial suitability of their business. This is why they require a fiscal year-end that will help a third party, like a financial institution, in order to assess the company. 

Everything you need to know 

The businesses with high and low periods of business during a year can usually benefit from having a fiscal year other than the calendar year. The benefits they can have are – 

• It depicts their business operation in a better manner.  
• The business owns a lot of inventory at specific periods of time. 
• Tax as well as financial planning becomes very easy. 

Conclusion 

While incorporating, you have the power to decide whether you want to choose a definitive year-end or a floating year-end. Floating year-end is the one that is able to change on a year-to-year basis, which is based on a particular time of the year, like the last day of February of every year. This is enabled as long as the fiscal year does not exceed 53 weeks – 371 days. Every year is divided into four distinct fiscal quarters. 

You can schedule a call with a professional accountant in order to get a quote on these services. The year-end of a business that coincides with your natural business year can also reflect positively on your financial statements, which you prepare specifically for potential investors. At that time of the year, a great deal of inventory gets converted into cash, thereby showing your most liquid state and that you are capable of paying back all debts you owe. This also makes the measurement of your performance a lot easier. You can apply for a business loan in Toronto to show the financial stability of your business.