Ever wonder why your employer’s “fiscal year” doesn’t follow a calendar year? Why some companies go November to October … or July to June? Time, it turns out, is relative.
Dr. Goose AKA David Lefkovits, a New York banker, wrote a limerick to help explain a fiscal year:
A fiscal year’s normally chosen
As the time that the auditor goes in
It’s often year-end
But that will depend
On the month that the seasonal low’s in.
Most companies close their books Dec. 31. But that doesn’t’ make sense for some industries. Take agriculture. Farmers often take on debt when crops are planted – think spring – and then hopefully pay of that debt and turn a profit when crops are sold – think fall. So it doesn’t make sense to end the financial year while holding all that debt. Every industry is cyclical, so it makes sense that their fiscal year corresponds.
The truth of the matter? Ultimately, it doesn’t really matter what date the fiscal year ends on, because quarters are compared to quarters and years to years, regardless of where they fall on the calendar.