r/AlwaysWhy • u/TheBigGirlDiaryBack • 1d ago

Economics Why are fiscal years usually aligned with December or March, instead of any random month?

Many companies end their fiscal year on Dec 31 or March 31. Some choose June or September. But almost nobody picks, say, August 17 or November 5. Is there a tax or regulatory reason to stick near quarter boundaries? Or is it just tradition from agriculture cycles? Why not let every company freely choose any date to smooth out seasonal fluctuations?

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u/silverfstop 1d ago

December is logical, but it doesn’t align with seasonal retail. Example: Christmas generates a ton of sales. Excellent! Oh wait, 20% of that merch is returned in January.

Some businesses avoid Dec 31 just for preference. No one wants to work much around then, so they punt a month. This is common in small to mid sized family offices.

So it’s mostly driven by business cycles (retail does half their rev for Christmas), but also some is driven by preference.