Owning and operating a business entails a long list of responsibilities and requirements that, when neglected or forgotten, can cause you a ton of headaches in the long run. These include looking for suppliers, handling customer inquiries, or making sure that your full cycle accounting is up to date.
Chief among these obligations, though, is preparing for the end of your fiscal year. Unfortunately, this is not something you can (or should) put off until the last minute, as it tends to become a rather involved process that entails plenty of rechecking and backtracking.
Facts about the fiscal year
The term “fiscal year” traces its roots to the Latin word “fiscus,” which refers to a purse or small rush basket. From there, it took on a different meaning, from effectively being the “public purse” to becoming the French word “fiscal” (“to tax”).
In simple terms, the fiscal year (also known as the “tax year-end” or “financial year”) is the year-long period followed by a business for logging its financial statements, accounting, and income tax reporting.
That’s why this is not the sort of task that you could rush–before you can move on to your next year of operating your business, you would need to go through all of your financial and tax-related transactions and documents over the past year.
Take note that a fiscal year does not always follow the calendar year. Your fiscal year depends on your business’s structure and type of tax returns, as well as your compliance with the requirements set by the Canada Revenue Agency.
For instance, if you did not begin operating your business in January of the current year, you can follow a fiscal year that ends not later than 53 weeks after the day you started.
Of course, you can also opt to end your fiscal year on Dec. 31 (which is typically the case for non-government entities) and file your first return as a partial year (after which you will observe the standard calendar year for your succeeding fiscal year filings).
Not every business is permitted to use a non-calendar fiscal year, though, so make sure you know the requirements for this, lest you incur severe penalties come year’s end.
Make sure you’re prepared
Given how important it is to accomplish your fiscal year filings on time, it’s certainly not a bad idea to get a head start as early as now. Here are a few simple tips to get you started on preparing for your year’s end.
1. Familiarize yourself with your tax responsibilities and requirements.
The number one mistake that most business owners make is not knowing the ins and outs of their tax and accounting requirements. Even if you’re considering accounting outsourcing options (more on that in a bit), it still helps to know exactly what you need to accomplish, when you need to.
2. Adopt an organized system of record-keeping.
Ask any tax accountant in Toronto, and they’d tell you that regardless of the kind of business you’re running, the best way to avoid the hassle of going through all your records at the end of the year is if you start the year by keeping all of them organized. You can either use cloud accounting software, hire an outsourced accountant, or even keep the physical receipts and records in categorized file folders and containers. Being diligent about this makes a tremendous difference in the long run.
3. Re-evaluate your current accounting strategy
At this point in time, you would probably already have enough data at hand to assess whether or not your current approach to accounting is working in your favor. If for some reason, you remain in the dark about your tax requirements, have insufficient financial data about your business on hand, or still have a hard time keeping track of your expenses, perhaps a change is in order. Are you doing all of this on your own, or do you have personnel on your staff in charge of these matters?
Ultimately, your year-end results should give you more than enough clues on how you can improve your business performance. More than just for legal compliance, meeting your fiscal year-end requirements will allow you to take a step back, look at your current business plan, see what you can change, and start making your new game plan for the coming year. Just let one overarching objective be your guide: To make next year’s financial year-end results better than this one’s.
Following the tips above will help you identify the weak spots in your business accounting. To get a better grasp on how to identify, handle and resolve problems of this nature, why not take a look at our whitepaper on ineffective finance and accounting teams? You can download it for free via the image below.