What is a natural business year?

A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of an organization's activities. For example, a school district will have a natural business year of July 1 through June 30, since classes for the school year end in early June.

A retailer's natural business year might be the 52-53 consecutive weeks ending on the Saturday closest to each February 1. This is a low point of activity as it follows the retailer's holiday season and its January clearance sales. The 52-53 week periods (instead of 12 month periods) will result in an equal number of Saturdays in most of the natural business years (as well as in the 13-week quarters and in the 4-5 week months).

Many companies have a natural business year of January 1 through December 31. On the other hand, some companies are required by government regulations to end their accounting years on December 31, even though it is not the end of their natural business year.

The term fiscal year is associated with companies having financial reporting years that do not end on December 31.

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