Natural business year for inventories and fiscal closings;

              Bulletin HASKINS & SELLS 59
The Natural Business Year for Inventories and Fiscal Closings*
By ELIJAH W. SELLS
In business, as in every other phase of
human activity, we are prone to run in the
ruts of custom and habit, to follow blindly
in the routine of tradition, accepting it as
a finality without questioning whether it
is wise or best. For generations the cus­tom
of a large part of the business world
has been to take annual inventories at the
end of the calendar year without seeming
to have any realization of the fitness of the
time to their individual line of business.
There is really but one proper time for
taking the annual inventory and closing
the fiscal year and that date is on the com­pletion
of the "natural business year."
By natural is meant the time when the
bulk of the annual business is passed,
when the busy season has given its best,
when the harvest time of the greatest
sales activity is over.
At the close of the natural business
year we reach a point like a turn in the
road, when we wish to review what we
have done, to see the last twelve months
in perspective, to find out where we stand
financially. It is a time for new planning
for the future, adjusting ourselves anew
to conditions, seeing the most advanta­geous
steps to take in preparation for re­newed
effort. It is the inventory, taken
at this time, that will reveal to us the
results of past effort and bring new wisdom
in building a better and finer future.
In this period following our year's
harvest and in the lull preceding new
seeding and planting, in our special line
of business, for the next harvest, we have
time to take an inventory. Then we are
freer from the pressure of insistent effort
and immune from many distractions.
Stocks of merchandise, too, are then at
their lowest so that the physical and
mental work of taking an inventory are
reduced to a minimum. Employes, too,
are then less employed and can co-operate
more effectively.
From every standpoint it is at the close
of the natural business year that inven­tories
can be made most easily, economi­cally,
and effectively. This period varies
in different lines of trade and industry, for
the natural business year that would be
best for one would be the very worst for
some other. It must be determined by the
individual proprietor, the firm or the
corporation, in harmony with the limita­tions
and demands of their specific busi­ness
in connection with general trade con­ditions
in their respective lines.
There are many practical reasons to
support the contention that most of the
mercantile business of the country with
which the consumer is concerned could
best take inventories and close the fiscal
year in the mid-summer months—July or
August. Those having heavy summer
trade, of which there are few, could best
take inventories and close in the fall—
October or November, while other dates
would harmonize better with other lines—
the manufacturers of articles of domestic
consumption, such as clothing and foot­wear,
in March or April, manufacturers
of agricultural implements in October,
coal mining operations in March, auto­mobile
and accessories manufacturers in
June or July, and railways in February
or March.
In many phases of the nation's business
activities uniformity is greatly to be de­sired.
The date of the fiscal year is not
one of these phases. What should be
standardized, however, is the principle it­self,
the principle that applies with equal
* Reprinted by permission from the Illinois Journal of Commerce. July, 1921.