The 13 Month Calendar Explained
As a business owner, have you ever been up to your eyeballs in calculations because you don’t trust your financials and thought, there has to be a better way to do this?
When it comes to many accounting processes, there usually is!
A great example of this is the 13-Month Calendar.
Within a few particular industries, switching your accounting processes over to using the 13-Month Calendar can greatly improve the consistency of data in your business, and most importantly, greatly reduce your frustration.
This article will help explain what the 13-Month Calendar is, whether or not it’s a good fit for your business, and how you can take the steps to transition, if so.
Let’s dive in.
What is the 13-Month Calendar?
Before we define what the 13-Month Calendar is, let’s define what it’s not.
It’s not the calendar you’re used to using!
You know the poem we learned as children?
Thirty days hath September,
April, June, and November.
When short February’s done,
All the rest have 31.
Errr… forget about it!
The 12-month calendar that most of us use in the United States (and the poem that’s now stuck in your head) is known as the Gregorian calendar, and unfortunately, it can make record-keeping more complicated for businesses in certain industries.
Due to its changing days each month (e.g., 30 days, 28 days, 31 days in a month), accounting periods will vary from year to year, meaning that important financial reports, such as your Balance sheet and P & L, will be thrown off.
EXAMPLE: If you own a business in retail or hospitality and you want to compare holiday seasonal sales in 2021 to holiday seasonal sales in 2022, the dates aren’t going to line up.
The 13-Month Calendar, also known as the 13-period calendar, is the solution for this.
The 13-Month Calendar is an alternative to our traditional Gregorian method and can be used for both accounting and corporate income tax purposes.
When using a 13-Month Calendar, every year is made up of 13 months or periods – not 12 – and each month/period has exactly 28 days.
By using the 13-period calendar in your business, you ensure sales comparability year-on-year, as the layout of the calendar lines up holidays, and ensures the same number of Saturdays and Sundays in comparable periods.
Hence, like days are compared to like days for sales reporting purposes.
Sound confusing? Let’s dive deeper.
How Does The 13-Month Calendar Work?
Unlike the typical 12-month calendar, the 13-Month Calendar consists of 13 accounting periods of exactly 4 weeks (28 days).
The 13-Month Calendar complements the weekly cycles used in many restaurants and hospitality businesses and provides for more relevant period comparisons on the profit and loss statement.
Since each period only has 28 days in it, this accounting method creates an extra accounting period each year. And, most importantly, every period has an equal number of weekdays and weekends in it. This makes it easier for business owners to compare financials from period to period.
The fiscal year always ends on the same day of the week, with Sunday or Monday being the most preferred date because of end-of-period activities, such as inventory counting, and ease of payroll reporting and processing.
Which Businesses Should Use The 13-Month Calendar?
The common Gregorian calendar you’re used to becomes a nuisance in industries where the bulk of sales occur on a weekend (e.g., restaurants and retail).
This is why using the 13-Month Calendar is common practice in retailing, hospitality, and grocery industries.
Note: If you’re currently a business owner of a retail, ecommerce, restaurant, or brewery business and are not currently utilizing the 13-period calendar, we should have a chat.
Should You Use The 13-Month Calendar In Your Business?
If you are in one of the above mentioned industries, and you’re wondering whether or not it’s worth switching your accounting calendar over to the 13-month method, the answer, in our opinion, is YES!
However, your accountant is the best person to have the conversation with.
Here are the best reasons why you should make the switch:
- Your sales follow a weekly model with the weekends representing the bulk of your business
- Your current monthly reports do not allow for proper period vs period comparisons
- The weekly report periods align with your payroll periods allowing for easier and quicker payroll cost allocation
- It improves cost allocation across periods with different cycles (i.e., a 4-week period vs. a 5-week period) which will in turn aid your pricing decisions
And a disadvantage to why you shouldn’t:
- Because the 13-Month Calendar is only 364 days long, every 5 or 6 years, depending on the number of leap years, there has to be a 53rd week added onto the last week of December for your fiscal year. Yes, a little weird, but the advantages are well worth it.
- This method may be confusing and strange to a business owner who is not used to using the 13-month method in their business. That’s why we strongly recommend engaging an experienced accountant to help you!
That’s it! So, the next time you are overwhelmed because of your business records and feel a weird urge to pull your hair out, it might just be a 12-month calendar problem.
Help is right before your nose, you can simply reach an experienced retail and hospitality accountant here!
We’re always here to help.
