Fiscal Year vs. Calendar Year: Which Is Right for Your Business?

While most businesses default to a calendar year, switching to a fiscal year can unlock better cash flow management, tailored budgeting, and tax planning advantages.

Understanding the Basics:

Calendar Year: January 1 to December 31
Used by default for sole proprietors, single-member LLCs, and most small businesses. Aligns with personal tax returns but may not reflect your business’s seasonality.

Fiscal Year: Any 12-month period ending in a month other than December
Allows businesses to close books after peak revenue periods, improving cash flow forecasting and inventory planning.

Benefits of a Fiscal Year:

• Defer tax liabilities by pushing income into a later tax year

• Align financial reporting with your busy season

• Ease year-end workloads during holidays

Texas Examples:

• A construction firm in Frisco uses a fiscal year ending March 31 to align with winter project delays and revenue spikes in spring

• An educational tutoring company in Allen closes its books in June, mirroring the academic calendar

Requirements:

Switching to a fiscal year requires IRS Form 1128 and a valid business justification. You may need CPA support to model financial impacts and document your rationale.

Book a fiscal year consultation to explore the best accounting cycle for your business.