November 30 income statement for August closings
While most companies close their books on December 31, some do things differently. All those who have opted for an end-of-summer closing have until November 30 to declare their results. What was the intended benefit? And how does it work? Find out more with our accounting tips.
Imposed rules and free choice
The accounting period
A financial year lasts 12 months. Except in the case of business start-ups, when it can last up to 24 months. Its duration is free to correspond to the calendar year or not. The founders set the closing date when they set up the company, and this date can be changed at any time.
Your closing date
Only organizations governed by the " Bénéfices Non Commerciaux " (BNC) regime, such as the liberal professions, are required to close on December 31.
For others, under the BIC regime (Bénéfices Industriels et Commerciaux), it's up to you to decide, as long as the date set is precise, such as June 30, or even during the month: such as June 16, and not variable: such as "the 3rd Friday of the month". For groups of companies, the only requirement is that the activities of the various entities be closed at the same time.
Why close at a different time?
Under the BIC regime, you're free to choose. So much the better... so what would be the best date? There are four points to bear in mind:
Follow your seasonality
Ideally, the accounting year should correspond to your operating cycle. So if you have strong seasonal fluctuations, aim for the period after the peak of activity. For example, if you have a sale, close one or two months after the sale. This gives you a calmer period to take care of your accounts, make inventories, etc. That's how many retailers close on August 31.
Boost your balance sheet
Irrespective of the operational benefit to your organization, your results will be positively impacted. By closing at the end of a good period, your inventories will be at their lowest and your cash flow at its highest. Your balance sheet and income statement will be in top form. This will be appreciated by the banks should you need to apply for credit.
Planning dividend taxation
If your company is a SA (Société par Actions), there's another aspect to consider. Dividends paid to your shareholders are taxable. To decide whether they should count for the current or future tax year, the most prudent course is to close the books on September 30. This gives your company the choice of distributing dividends either before the end of the calendar year, or at the beginning of the following year.
Avoid being caught short
The context of legal reforms is also a strategic variable. As your company is based on the calendar year, it is subject to regulatory changes, even at the last minute. Reforms passed by December 30 will be applied retroactively. This leaves you no margin for adaptation to optimize your management accordingly. This is a penalizing situation, all the more so in view of the burning issue of the 2017 budget - the Finance Bill - an amendment to which concerning SMEs was recally approved with a view to lowering the IS (Impôt sur les Sociétés) rate.
How does it work?
Respecting deadlines
A closing date other than December 31 may be advantageous. Now, are there any specific terms and conditions? Just one: the deadline. At the end of the calendar year, the tax authorities give you 4 months to file your return. You have exactly until the 2nd working day following May 1st. However, if you close your business on another date, the deadline is reduced to 3 months. So if you close on August 31, you have until November 30 to file your income tax return.
Your accountant's availability
When you consider that nearly three-quarters of all companies close their books at the same time, on December 31, you can imagine the work overload for chartered accountants. By setting a different closing date, your chartered accountant will be less overwhelmed. And this availability reassures you about your ability to meet the deadline, and can really improve the quality of exchanges between you and your service provider.
Contents of the tax return
What does the tax return actually consist of? Also known as the "liasse fiscale", it involves declaring your company's taxable income, on the basis of which your corporation tax will be calculated. The form used for the declaration, if you are a BIC company, is n°2031.
For simplified tax, it's the n°2033, and for standard tax, the n°2050. The form also contains appendices with tables showing all the balance sheet items.
Closing the books at the end of the summer can be strategic for many companies. Tax returns must be filed by November 30. With the help of your chartered accountant, you'll be able to deliver the calculation of your taxable income to the tax authorities.
Article translated from French