Every business across the world has a fiscal year, irrespective of the ownership; whether private or government. It is a firm’s financial year that is twelve months in total used for accounting purposes and preparation of financial statements. Fiscal years are commonly required when discussing the firms budget and understanding the financial status. Not every company sets its year-end date on 31st December; firms choose dates across the twelve months of the year. A fiscal year is significant since it helps in the financial planning of the company for either the short or the long-term goals. The bottom line is, the year-end dates have to be determined before the end of the first twelve months of incorporating your business. You should contemplate the following before choosing your fiscal year.
Availability of an accounting firm
Outsourced accounting resources are not entirely available throughout the year, at least not at the same rate. You should choose your fiscal year wisely considering other accounting firms might also be having the same year-end dates. Before you decide on the dates, check around for accounting services in Singapore and set a favourable date. Agree with the firm on the deliverables and the schedules to use. Before you sign them in as your service providers, be sure to vet them.
You should be aware of your business cycle. This can come in handy since some companies have a lot of inventory, which may hinder accuracy and increase costs since it takes a lot of time to run through the entire inventory. For manufacturers, it is the partially-completed product, raw materials, and the already finished products whereas, for the retailers, it’s the goods in the store and the ones stocked on the shelves. It is in your best interest to choose a year-end date when you are not too busy, to avoid making unnecessary mistakes.
The type of company can affect the decision regarding the year-end date. Some businesses require the stakeholders to be thoroughly involved in this decision-making process. Other companies, such as the ones run by the government agencies and the non-profit organisations tend to choose year-end dates that are collaborating with the government’s fiscal year. For a private firm, you can decide to set a time that works for you although you might also be required to provide a legitimate business reason for making that change.
Sole proprietorship or partnership
Depending on the government’s laws, unincorporated businesses can choose any year-end. In some sectors where these rules are disregarded then, the business has to use the calendar-based year-end. Hence, use the December year-end when you complete your tax reporting purposes. Therefore, you need to know the government rules that can affect your business.
The choice of year-end date is a decision that will remain the same in that firm throughout its existence. So when choosing consider all the present and future dates critically. The chosen date should not affect the future business relations thereby requiring to be changed whatsoever. Therefore, consider all the short and long-term goals before coming up with the dates.
Due to tax reasons, you should also choose the best year-end date when you can achieve a tax deferral hence paying the bonus out to the business. This lag helps firms claim tax deductions bonus expenses in one year.
The next time you sit down to decide on the year-end fiscal year, study the above factors carefully or work reputable accounting services in singapore. The fiscal year will always affect your business financial records and help you in making informed choices regarding the progress of your business.