Throughout the pandemic, there has been an increased focus on budgetary disruptions as companies attempt to develop strategies to tackle each quarter of the fiscal year. Sometimes called a tax, accounting or financial year, a fiscal year is a span of 12 consecutive months that a business chooses to track its annual spending and income. Federal tax filings, financial reports and internal audits are all based on an organization’s fiscal year. Since a fiscal year is not a calendar year, a business can start and end its fiscal year differently than other companies based on their financial practices.
A fiscal year is important because it is a set timeframe to calculate a company’s profit margin, costs and revenue. These numbers can be compared with the budget to determine the overall yearly profit and financial success. Many businesses will make the end of their busy season the end of their fiscal year to successfully track performance and finances.
An online Master of Business Administration from the University of West Florida gives graduates insights into the fiscal year process and prepares them with the strategic skills and expertise in finance.
Common Approaches to Creating a Fiscal Year Plan
Creating an annual budget and business plan is an essential financial aspect of every business. Taking the time to ask questions about the next 12 months and understanding the steps to grow the organization are important. Every business, regardless of size, should have a plan for its annual budget. A budget needs to cover a specific period, have a defined realm and be formally registered and documented.
For example, over the last few years, many businesses have experienced changes due to the pandemic. An organization might notice that its target market has shifted, the business structure has changed, it failed to meet or exceeded financial expectations or it might need to rebrand. Professionals must carefully analyze all of these changes by using the data available and reviewing the expenses and income for the current year.
If the fiscal year projections differed from the outcomes, it’s important to understand why. Management teams can examine numbers and provide valuable insight into performance. All departments should be consulted to give expectations and feedback regarding the upcoming fiscal year to have a smooth budgeting process.
Creating early projections for the next fiscal year based on the same processes and market value as the current fiscal year can provide realistic goals. Considering changes in technology or customer preferences can spur new ideas regarding marketing, distribution or price changes. Devising a budget involves strategizing to lower costs and increase sales. A detailed budget can forecast a fiscal year-end profit while considering distribution changes, promotional strategies and goal-based spending.
Some companies prefer to be conservative when projecting the following year’s profits. Leaving room for unexpected expenses or emergencies is better than forecasting unattainable projections. Strategic planning can also involve a discussion of expansion, calculating risks and determining what is affordable. Having each department within the business create an annual fiscal plan can help business leaders design benchmarks for reducing spending, abandoning useless marketing strategies or applying for more credit.
With the comprehensive curriculum of this online MBA program, students can gather expert experience, business skills and tools to advance their careers. Students gain a deep understanding of a company and its related industry from the supply chain, economic, marketing, financial, information systems and strategic perspectives. By gaining group problem-solving, teamwork and leadership skills, graduates will be able to direct and manage others to help a business excel.
Learn more about the University of West Florida’s online Master of Business Administration program.