The end of your business’s fiscal year should be a time for review and reflection on what your business did well and what it can improve upon, as well as a time of fiscal preparation. If you’re new to running your own business, you might not even be clear on the distinction between the terms “calendar year” and “fiscal year” and “tax year.” Here’s how Nolo defines it:
“The vast majority of small businesses use the calendar year as their tax year — that is, their tax year begins on January 1 and ends on December 31. However, your tax year does not necessarily have to end on December 31. When a business’s tax year ends on the last day of any month other than December, it is said to have a ‘fiscal year.’”
So if you’re heading into the home stretch of your fiscal year (whenever that is), stick to these three tips to end on a high note:
Gather all of your receipts throughout the year.
To keep things together, make a point to begin each fiscal year with a new drawer or folder set aside for your business receipts. Better yet, use a handy app to digitize your paper receipts. Just as receipts are beneficial for tax day in April, they can have a similar purpose for the end of the fiscal year. Additionally, you can look back at your receipts to see what it is exactly your business spends money on.
Ask yourself the right questions to best learn from your receipts, including:
- What does your business spend the most money on?
- What are you going to try and cut back on for the next fiscal year?
- What are you going to spend more on?
Know your end date.
Don’t let the end of the fiscal year creep up on you! First of all, know when your fiscal year ends. This can be difficult, especially for new businesses, because it can be different for every business, as mentioned earlier. Though the government’s fiscal year (FY) ends September 30, small businesses can have varying fiscal years — depending on the industry, if seasonal, and the business owner’s preference. A lot of businesses, however, typically wrap up their year on December 31. Usually, LLCs, S Corporations, partnerships, and Sole Proprietors simply use the calendar year, but there are exceptions for certain small businesses to use their own fiscal year instead. Find out where your business lands and mark your calendars! You can locate this date by tracking down the first tax return you ever did for your business.
Communicate with your shareholders.
Another facet of the end of the fiscal year is reporting annual earnings to your shareholders (if you have shareholders). This is a great opportunity to communicate with your shareholders about your business. Explain to them why you think this year went as it did, how your company plans to grow, what its future goals are, and what they can expect being shareholders of your business. You don’t necessarily need to meet with them individually, but sending along a clear, concise packet containing information on your business’s plans for the future will go a long way toward building your shareholders’ confidence in your business and their excitement for what’s ahead.
This article is not intended as legal or tax advice. If you have questions, please contact your legal or tax professional.