Irregular accounting periods and how software can help tackle this problem

You probably learned a rhyme at school that began: “Thirty days hath September, April, June and November.” It was intended to help your infant mind make sense of our confusing calendar.

But if your work involves finance, the irregularities of that calendar have probably continued to frustrate you in adult life.

How, for example, are you expected to compare retail sales between two months when one contained four Saturdays and one had five?

How do you measure performance in a 28-day month against a 31-day one?

And wouldn’t such calculations be easier if months and years started and ended on the same day of the week?

Some of the brightest minds in business have been applied to modifying the calendar so it better suits the needs of accountants.

Irregular Accounting

Alternatives to the traditional accounting calendar

Several different accounting calendars have been devised over the years to even out some of the blips in the conventional 12-month year.

The 4-4-5 accounting calendar: Accounting’s most common deviation from the traditional calendar earned a blog post of its own. It sees a “month” of four weeks followed by another “month” of four weeks and then one of five weeks.

This means you can compare one 13-week “quarter” with another and make comparisons between periods in different years. But it still leaves us with some months longer than others – and requires the creation of a 53-week accounting year every five or six years, to avoid it getting too far out of sync with the “real” calendar.

The 4-5-4 calendar or the 5-4-4 calendar: These follow the same principle as the 4-4-5 calendar but adapt it to put the longest “month” in the middle or at the beginning of the quarter.

52-53 week fiscal year: Some organisations value ending each financial year on the same day of the week – usually on a Saturday or Sunday. Perhaps the simplest way is to declare that the year will end on, for example, the final Saturday of the chosen month. (Another alternative is to choose the Saturday nearest the end of the final month, which means sometimes pushing year-end into the following month by a day or two!) The year can be divided into equal “months” of 28 days, but there have to be 13 of them.

Under this system, the end of the financial year creeps forward by a day each year, and at some point a 52-week year has to be followed by one of 53 weeks.

Daily, weekly or irregular reporting: All businesses are bound by the need to report and pay taxes yearly, of course. But within the year, measuring data between months or quarters can be of limited use in some sectors.

In some industries, comparisons between individual days are all-important. In others, you might want to weigh up irregular periods. In the theatre sector, for example, you could be keen to compare the success of one production with another, however many days of the calendar it occupied. You need a system that can measure periods more flexibly.

How software copes with irregular reporting periods

If you can keep up with the complexities of irregular accounting periods, you might be smarter than your accounting software.

Basic finance systems tend to be built around dates, so you will struggle to adapt them to any departure from the conventional calendar.

Even if you have more sophisticated software, working out how to adapt the system to your requirements can feel like wandering unprepared into a university lecture in computer science.

The most user-friendly software, however, deals in periods rather than dates – and you can define the length of those periods.

What’s more, if different parts of your organisation are running to different calendars, that should not present a problem. Software that’s built to handle multi-company consolidation ought to be able to factor that in and produce the reports and dashboards you need.

The calendar may be one part of our lives that refuses to simplify and go decimal – but software can make managing it a great deal easier.

Learn more

To see how iplicit handles different accounting periods and other specialised requirements, get in touch for a demonstration. You can also take a quick online tour of the software.

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