Fiscal Year
Definition
A fiscal year is the 12-month period a company uses for financial reporting and tax purposes. While many startups use the calendar year (January to December), companies can choose any 12-month period as their fiscal year to better align with their business cycle or operational patterns.
Overview
A fiscal year (FY) defines the 12-month window for annual financial statements, tax filings, and budgeting. Most startups default to the calendar year (January 1 to December 31) for simplicity, but companies can select any start date. Retail businesses, for example, often use February to January fiscal years to capture the full holiday selling season in one period.
The fiscal year choice has practical implications for tax planning, financial reporting, and investor communications. Changing the fiscal year after establishment requires IRS approval and can complicate year-over-year comparisons. It is best to select the right fiscal year early and stick with it.
For SaaS startups, the calendar year is almost always the simplest choice because it aligns with most investors' reporting periods, simplifies personal tax obligations for founders, and matches the January to December budgeting cycle that most companies follow. Deviating from the calendar year adds complexity without meaningful benefit for most software businesses.
Example
A company with a fiscal year of July 1 to June 30 reports its "FY2026" results covering July 1, 2025 through June 30, 2026.
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