How to choose your corporate year-end date

Every organization needs to choose a fiscal year-end, but are some months better than others, and if so, why?

Selecting an appropriate year-end is a significant decision for any company in Canada. This choice can influence your tax obligations, financial planning, and even have an effect on your business's operational efficiency.

Let's have a look at a few key considerations that you should keep in mind when choosing your year-end.

1. Keep the disruption to a minimum

Your fiscal year-end should aim to have a minimum disruption to your daily operations. If it's possible to do so, choose a date during your slower times.

EXAMPLE If you're a restaurant or retail business, using a calendar year-end (December 31) could potentially create issues as the last few weeks of December are most likely a busy time of year for you. Consider a less busy month earlier in the year.

2. Think about the tax implications

Your fiscal year-end determines the deadline for filing your corporate tax return. With this in mind, companies will often choose a year-end that aligns with their tax planning strategies.

EXAMPLE If your company's year-end is after July 6, you'll have an option to defer tax. More specifically, you'll be able to deduct bonuses as an expense in the year they're accrued, or delay paying them until after December 31, allowing you to defer that extra income until the next calendar year. You can also maximize your deferral benefits when paying out excess income as dividends this way.

3. Align yourself with your industry

If basically everyone in your industry has the same year-end, it's probably a good option to have a look at. In some instances, this can even help simplify direct comparisons with industry peers and competitors.

EXAMPLE The government operates on a March 31 year-end, so if your business is government-related, it could be beneficial to be on a similar accounting schedule.

Other things to consider

Your accountants get busy, too

A lot of organizations have December year-ends, which means accountants are extremely busy during this time. Here at Avail, regardless of the month, we'll still get your year-end completed on time and accurately. But, if you do happen to choose a month other than December, you might get some bonus points.

Make it the end of the month

This just keeps everything organized and easy. If your lucky number is 17 and you want to choose the 17th, then by all means, you can do that. But if you do that, we can say with a fair amount of certainty that you're going to regret that choice. End of the month. Simple. Done.

Yes, you can change it

While changing your fiscal year-end is possible, it can be a complex process involving adjustments to accounting systems and internal controls, completing the necessary formal steps with the CRA, and in some instances, dealing with regulatory filings as well. Companies should carefully evaluate whether their current or proposed year-end provides the flexibility needed for future growth and changes.

Questions?

If you have any questions about this article, need help choosing a corporate year-end date, or want to know more about the services we offer, please contact one of our Business Advisory or complete the contact form below.