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CHANGING TO A BETTER CALENDAR

If you do not use the 4-5-4 Retail Accounting Calendar, I want to encourage you to change to this calendar as it makes sales planning easier. With the regular calendar, comparisons to last year are complicated by the fact that a month may have 4 Saturdays this year while it had 5 last year. For most retailers Saturday is their largest volume day of the week. It makes it more difficult to plan sales when you are looking at unequal months.

The better accounting calendar is the 4-5-4 Retail Accounting Calendar. The 4-5-4 Retail Accounting Calendar divides the year into quarters with the first and last month of each quarter consisting of 4 weeks each and the middle month of each quarter consisting of 5 weeks. Each accounting calendar month will begin on a Sunday and end on a Saturday. Each accounting calendar month will have the same number of selling days as the same month last year. For example, March has 5 perfect weeks every year, 5 Saturdays, 5 Mondays, etc. With the regular calendar this is not true, since March may have 5 Saturdays this year and only 4 Saturdays next year. This makes it more difficult to plan sales.

For holidays that are a set day of the week, such as Thanksgiving, there will always be the identical selling days before and after the holiday, year after year. There will always be two selling days in November following Thanksgiving. Each month will consist of either 4 or 5 perfect weeks making it very easier to analyze payroll costs. With the 4-5-4 Calendar, each accounting period for one business year corresponds to the same period next year, and the next. This provides an invaluable review and forecast tool for management.

The 4-5-4 Calendar is especially suited for use in preparing sales forecasts and operating budgets. Also, since each month ends on a Saturday you will enjoy the convenience of taking physical inventory counts at week end and not having to either subtract or add sales which preceded or followed the physical count to arrive at a clean cut-off. The inventory counts should therefore be more accurate.

The  4-5-4 Retail Accounting Calendar was devised with the needs of the apparel,  sporting goods and gift retailer in mind. Our business cycles are those periods of time between the start and end of a sales season. In general, our business cycles end in July and January.Therefore, the standard 4-5-4 Accounting Calendar begins with the month of February, which is traditionally the beginning of the Spring selling season.

Changing to the 4-5-4 Accounting Calendar will make very few differences in the store's procedures. About the only difference is to realize that for the first year, sales comparisons to last year can be made only at the end of each 13-week quarter.

The 4-5-4 Accounting Calendar is also recognized by the IRS for income tax reporting purposes. It is referred to by the IRS as the 52-53 Week Year. To adopt the 52-53 Week Year it is necessary to file a statement with the tax return for the first tax year for which the election is made. If you are keeping the same fiscal year end,  you make the election by filing your tax return for the 52-53 week year and attaching to it a statement showing:

1)  the day of the week on which the tax year will always end (SATURDAY)
2)  that it will end on the date such day of the week (SATURDAY) occurs nearest the end of the month
3)  and the month with reference to which the tax year will end (JANUARY for most retailers).

Note: Many retailers have a December fiscal year end because they are not corporations and have no choice about their year end.  You can still use the 4-5-4 calendar.  You can actually keep your store’s books on the 4-5-4 calendar ending January then make a simple adjustment at your December year end to report your tax information for 12 months (by adding in the data from the prior January).

According to the IRS: “A taxpayer changing to a 52-53 week tax year does not file FORM 1128 if the 52-53 week year ends with reference to the same calendar month as its previous tax year ended, and the taxpayer keeps its books and computes its income on the new 52-53 week year.”

However, once you change to this 52-53 Week Tax Year, you can not change to another tax year, including going back to a Jan. 31 year end (if that is your regular year end), without prior approval from the IRS.  This is done using their form 1128-Application to Adopt, Change or Retain a Tax Year.

You will find it is not hard to change.  It is just a matter of changing your thinking a little.  If your computer software does not support the retail 4-5-4 calendar then it may be time to look for a true RETAIL package.  To get a copy of the 2006 4-5-4 calendar for your review - - and use if you decide to change - - just send us an email with your request and your name, store name and address.

This is the calendar the BIG retail chains all use to report their sales.  It is recognized by state governments for reporting sales taxes.  I know this is not “the way it has always been done” and I know that “you have been doing just fine” using the regular calendar; however, once you change I think you will be glad you did.  Try it.  If you do not like it, you can always change back to the regular calendar before the end of the year and the IRS will never know.

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