What is a Commercial Year?

Malcolm Tatum

Commercial years are annual periods that are used by some businesses and non-profit organizations for various purposes. The typical formula for a commercial year involves a series of twelve consecutive 30 day months. This will be true regardless of the calendar months that coincide with the same period covered by the commercial year.

Man climbing a rope
Man climbing a rope

A commercial year may be employed for a number of different reasons. For businesses, the use of 30 day month increments within the year serve as a consistent means of evaluating inventory levels. This can be helpful in calculating taxes associated with the inventory on hand, and with arranging ordering and replenishment of the inventory based on projected usage.

Corporations will also make use of the commercial year when dealing with sales figures and making projections for future sales. The use of the standard length month makes the process of projecting trends in sales for several upcoming years much easier. Projections can help the company prepare to add sales fields, expand or decrease the size of the sales force, or otherwise make adjustments based on the anticipated performance during each projected commercial year.

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Non-profit organizations also make use of the commercial year format as well. The determination of how to fix the commercial year often depends on the nature of the work conducted by the organization. For example, a non-profit that focuses on activities for school age children will often model the commercial year to coincide with the school year utilized in the local jurisdiction. The benefits to this approach is that the commercial year allows the non-profit to have time to plan fund raisers and secure grants for projects before the dawn of the summer months and the increased level of activity by children in the programs offered by the organization.

A commercial year may follow the same general flow of a calendar year, but this is not often the case. Generally, businesses and non-profit organizations choose to utilize either June 1 or September 1 as the beginning of a new commercial year. Other variations are used in different parts of the world, based on local needs and customs.

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