What is a fiscal year

A fiscal year is a 12-month timeframe that a business adopts for managing its financial records and fulfilling tax reporting obligations. Unlike the calendar year, which runs from January 1 to December 31, a fiscal year can start and end at any point depending on the needs and activities of the business.

Businesses may choose specific fiscal year dates based on factors such as their operational patterns, revenue cycles, or the nature of their industry. For example, a retail business experiencing peak sales during the holiday season might prefer a fiscal year that aligns better with its busiest period. Similarly, a business in a seasonal industry like tourism or agriculture may opt for a fiscal year that better reflects its revenue and expense patterns.

The government also plays a role in determining fiscal year dates, especially concerning tax reporting requirements. These dates are crucial for businesses to accurately report their financial information and ensure compliance with taxation regulations.

Fiscal years are named based on the year in which they conclude. For instance, if a fiscal year spans from April 1, 2023, to March 31, 2024, it would be referred to as FY24. This naming convention simplifies tracking and referencing specific financial periods for both internal and external stakeholders.