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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.
Object Description
Title |
Natural business year for inventories and fiscal closings |
Author |
Sells, Elijah Watt, 1858-1924 |
Subject |
Fiscal year Inventories |
Citation |
Haskins & Sells Bulletin, Vol. 04, no. 07 (1921 July 15), p. 59-61 |
Date-Issued | 1921 |
Source | Originally published by: Haskins & Sells |
Type | Text |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Libraries. Accounting Collection |
Date-Digitally Created | 2009 |
Identifier | HS Bulletin 4-p59 |