Rhyme or reason for this trend?
One would think the public has more spending power or willing to spend due to the holidays (Q4).
Or due to more employees on vacation leaves etc. the rate of production slows down/not enough service staff?
In: Economics
Most companies in the world aren’t selling holiday gifts. Pretty much every other kind of economic activity is down over the holiday season because people are taking a break.
Quarters in business don’t necessarily line up with the calendar. Businesses can chose what month is their year end.
Year end is the busiest time for corporate Accounting. The companies administration has a ton of reporting and auditing to do, and this is when companies are notorious for not wanting to spend money unnecessarily to get those few extra profit dollars on the books.
Corporations deliberately chose a year end date that is not in their busy season for that reason.
If you are a retail chain for example, you don’t want year end to be Dec 31st because Christmas is the busiest time of the year.
So making your Q4 the least profitable quarter is practical choice to make it easier for the team.
A lot of corporations also refuse to allow vacation and leave to accumulate, so managers have to force their team to take all their remaining leave at the last minute making teams less productive.
Lots of people on vacation means less people working and a lot of companies are b2b so that’s a slow down on both ends and just general lower productivity around the holidays are to blame for this. Most companies aren’t retail businesses that pick up for the holidays. The end of the calendar year is often the slowest time for companies.
Wholesalers biggest quarter is Q3, because their merchandise needs to be in retail stores before Q4.
Fiscal quarters don’t always align with calendar quarters (eg. Apple’s fiscal Q1 is Oct-Dec). And what companies are you looking at specifically? I guess some manufacturers and such could book their sales in calendar Q3 as they sell to retailers who intend to sell goods in calendar Q4.
In addition to what previously been said, there’s always a considerable amount of legal, yet strange fuckery going on in Q4 to manipulate the year end numbers for tax reasons.
A lot of times, companies push out a lot of expensive things all year to make quarterly results look better to shareholders, then finally end up paying the piper in Q4
I would add that most companies don’t do a “complete” closure of the books every month or every quarters. And, as closing Q4 is also a complete closure of the financial statement, they do special adjustments that might be in only Q4. Part of these adjustements look like expenses even if they’re not linked to an actual exchange of cash or yeah we got the service but we don’t have the bill yet. So we put that expense and a debt to tell the reader that it’s incoming, we know it and it’s linked to that period… These happen every month but not every companies try to do a clean cutoff between every months or every periods but then it’s important to do it for the yearly financial statement.
An example is the wear and the depreciation of the machines and the buildings. In best practice we would have an expense every month to account for that and all quarters would be equal. Otherwise, or if they didn’t evaluate that expense properly, they will end up with a larger expense in Q4 to catch up to that depreciation of the year.
Another example could be a full review of the inventory where you decide to throw old stuff that no longer has any value. You now need to reduce your stock in your books and you do it with an expense. The full review of the inventory and its value is generally done only to close the year so again you get a larger adjustment expense in Q4.
Fiscal year ending , means in many places letting everything run on fumes . Companies know it , so they also adjust to it . It is a purely tax measure which all companies use. Stockpiles have a production cost , which is not sold , so in the fiscal year ending , they make sure they got “no” stock left.
As for how the holiday spending affects revenue, only certain types of companies see a big boost. If you don’t sell things people see as gifts or holiday decor/food, they are less likely to buy it because their money is going to buying gifts and other holiday stuff.
(sidenote: this is why you see so many products that have nothing to do with the holidays and make crappy gifts marketed as holiday stuff… if they cant convince people to buy it, they will have less profit during that time)
But even those companies might not have the bump you would think, because lots of people buy early and spread their purchases out, either so they don’t forget X asked for Y or because they cant afford to buy it all in a short period.
Latest Answers