Business years consist of twelve consecutive 30-day months and are used by businesses and non-profits for inventory assessment, sales projections, and planning. The start of a business year may not coincide with the calendar year.
Business years are annual periods used by some businesses and non-profit organizations for various purposes. The typical formula for a business year involves a series of twelve consecutive 30-day months. This will be true regardless of which calendar months fall within the same period covered by the business year.
A business year can be used for many different reasons. For companies, using 30-day increments per month in the year serves as a consistent means of assessing inventory levels. This can be helpful in calculating taxes associated with on-hand inventory and organizing inventory orders and replenishments based on projected usage.
Companies will also make use of the business year when dealing with sales figures and making projections for future sales. Using the default month length makes the process of projecting sales trends for years to come much easier. Projections can help the company prepare to add sales fields, expand or decrease the size of the sales force, or make adjustments based on expected performance during each projected business year.
Non-profit organizations also use the business year format as well. Determining how to fix the business year often depends on the nature of the work performed by the organization. For example, a non-profit organization that focuses on activities for school-aged children often models the business year to match the school year used in the local jurisdiction. The benefits of this approach are that the business year allows nonprofits time to plan fundraisers and secure grants for projects before the summer months begin and the increased activity level of children in programs offered by the organization.
A business year can follow the same general flow as a calendar year, but this is not always the case. Businesses and nonprofits often choose to use June 1 or September 1 as the start of a new business year. Other variations are used in different parts of the world, based on local needs and customs.
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