Anyone want to geek out accounting-style with me for a minute?!  I’m going to go full geek, so please prepare yourself.  Let’s talk about how accounting likes to be matchy-matchy.  One of the tenants of generally accepted accounting practices (GAAP) is that a business’ expenses should be reported in the same period as the related revenues.  Believe it or not, matchy-matchy is not this guiding principle’s official name, thought it’s not far off.  It’s called the Matching Principle.  Original, I know; but simple and easy to remember, just the way we like it.  😉  By default, the IRS requires a calendar year end where a business will “close its books” and prepare financial statements for January 1st through December 31st.  For a lot of companies, this works well for their income and expense cycle.  However, for some businesses, the selling cycle may not occur when the majority of expenses are spent for those sales.  For example, some very seasonal businesses may incur the bulk of it’s expenses in September and October, but almost all the sales are between April and May.  A regular tax calendar (where year end is 12/31) would split these expenses and their related revenues into two separate years, resulting in misleading financial statements.  In the preceding example, a fiscal year of 9/1-8/31 may be more appropriate.  While the IRS allows a departure from the presumed 12/31 year end date, a business may submit an application to change it’s fiscal year end date.

You may not know, but June 30th can be a very special day for some accountants and it is fast approaching (I know, I know. Summer if flying by way too FAST!!).  June 30th is one of the most popular dates used by small businesses as a fiscal year end. For many accountants, their busy cycle is just ramping up as deadlines quickly approach to close their books and prepare financial statements for analysis based on a 6/30 year end date.  If you watched our video series debunking accountant myths, you’ll know many people assume all accountants are only busy from January through mid-April because they do taxes.  You’ll also know that’s a total myth!  This week’s post serves as a shout out to our geeky professional cohorts who are only beginning the most stressful part of their year AND having to do it when the weather beckons them to play outside.

As a small business owner you may wonder if a fiscal year end may be a good fit for you.  If you think it may be something to consider, contact your tax accountant to get a good idea of whether your financial statements currently follow the matchy-matchy, um, I mean Matching Principle. Your accountant will not only be impressed with your strategic inquiry, but also your knowledge of nerdy accounting terms. 🤓