This article is relevant if you are managing the accounting system and you are using a 4-4-5 calendar.
In my article on how to setup a 4-4-5 Calendar in NetSuite, I offered the basic practice to setup this calendar. Here, we are offering an Excel-based calculator that will help you perform the date math.
Download Excel Based 4-4-5 Calendar Calculator
Click the image to see what the calendar looks like. Feel free to download the Excel 4-4-5-calendar-setup-worksheet. Remember to select the first day that your calendar day begins and the sheet will do the rest. You can then set up the accounting periods using the sheet as your guide.
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When a 4–4–5 calendar is in use, reports with month-by-month comparisons or trend over periods do not make sense because one month is 25% larger than the other two. However, you can still compare a period to the same period in the prior year, or use week by week data comparison.
Hello Janelle,
Indeed, 4-4-5 is really powerful when you want to compare things weekly and quarterly. Most of us are very month oriented by tradition / habit. However, many businesses, especially retail, move in a weekly cycle. They want to compare same week sales this year versus last year. In our professional services practice, it makes sense. Our timesheets are weekly and the 4-4-5 periods line up perfectly to how we generate revenue and produce costs.
Are you using 4-4-5 in your business and which accounting system do you have?
Marty
When a 4–4–5 calendar is in use, reports with month-by-month comparisons or trend over periods do not make sense because one month is 25% larger than the other two. However, you can still compare a period to the same period in the prior year, or use week by week data comparison.
Thank you Ruben for the comment. Indeed, the idea behind 4-4-5 is to give up monthly comparisons for consistent period comparisons based on weeks. The need for reliable comparisons is the primary reason to give up traditional monthly comparisons. In my mind, we are habitually trained to think in monthly terms but the nature of mismatched number of days doesn’t help when trying to judge real current to historical business performance on the same terms.
Marty
Hi Marty,
Can you setup 4-4-5 if you have a company in France that has to have a fixed FY end such as June 30th every year. we would like to use 4-4-5 and fullfill statutory reporting
Thanks
tony
Hi Tony,
The 4-4-5 calendar does not naturally terminate on a specific day. Hence, the answer is no. However, you could create a 13th accounting period that represents a few days to get it to land on the 30th. Yet, the power of 4-4-5 is then negated. The idea is that you want your calendar week and months to start and end on the same days so you can get powerful comparative capacities.
Does this make sense?
Marty
Thank you – makes perfect sense.
Hello Marty,
How do you resolve the fact that with the 4-4-5 calendar Jan 1 moves further and further into the year as you go. By 2021 the last two weeks of December are actually the first two weeks of FY 2022?
I don’t know how to resolve this other than to add an additional week to the end of a year, but what is the accounting standard for when to add this week?
Hi Russell,
Yes, my understanding is that if you want to keep the fiscal calendar relative close to a traditional Jan 1 to Dec 31 calendar, an adjustment week is needed. This can be planned for and I would put the adjustment week outside of the “quarter” structure and add the week in a slow period. I don’t believe there is a standard that is GAAP. There may be tax reporting implications. If I come up with guidance that I can point to, I will follow up.
Marty
Thank you sir. The tax implications had not occurred to me so that was an enlightening point which I will bring up with the CFO to see how he wants me to proceed.
I appreciate the reply and your Excel calendar. Thanks for both!
Thank you Sir. i have one question. I am developing a 4-4-5 calendar system for a web analytics software that will run reports based on a 4-4-5 calendar.
In a 4-4-5 calendar, how will the 365th day accounted for in week-to week reporting? Will the last week of the year always contain one extra until it reaches a point where one whole extra 53rd week can be added to the year?
Yes, you have the basic way to think about it. Usually, this should be user defined so they can select the timing for which they will have a 53rd week.
Marty
Just a followup from my previous comment. In the above example, where does 12/29/2013 fit in considering the fact that my start date is always the same and never changes?
The general thinking is that you will lose a day each year. What many do is they add one more week to the end of a year to get the 4-4-5 calendar to sit closer to the natural Jan 1 to Dec 31 dates. You can count on doing this every 4 to 6 years.
I wanted to come back and provide a key to keeping the 4-4-5 calendar aligned to a traditional calendar. After a lot of testing these rules hold true for at least the next 1000 years.
My challenge was to build a 4-4-5 calendar that kept Dec 25 in the last month of the fiscal calendar. As many have pointed out the traditional calendar creeps further out of the fiscal calendar without some sort of adjustment. My business is heavily invested in the holidays and requires that Christmas stays within the end of the last month of the fiscal calendar.
In the end we had to add an additional week to the fiscal calendar every 5-6 years to keep this alignment. We called this the “Leap Week” and it just gets tacked onto the end of the last month of the year (again, this is needed to keep Dec. 25th in the right period).
The rules:
If Jan. 2 falls on a Saturday then you need a leap week.
If Jan 2 falls on a Friday and it is a leap year (29 days in Feb.) then you need a leap week.
This works in our case because our fiscal calendar stays as true to the traditional calendar as possible. It may not be true for fiscal calendars that start somewhere other than January, I haven’t tested that scenario.
I have a set of user-defined functions that are both Excel and Access compatible and I can build a demo workbook to demonstrate this if anyone is interested.
I am still monitoring this thread so I should see any requests for further info if needed. Once again, thanks to Marty for having this out there for us to find.
I should probably note that our week runs Sun – Sat. That is why my rules fit my need (in case you were wondering why I took the first Saturday in January as a staring point).
Probably hold true for Mon-Sun weeks too, but again, I have not tested that scenario.
Russell,
Really high quality thinking on this concern! Much appreciated. We may want to enhance the template to include that logic.
Marty
I have expense data that is laid out in varying monthly amounts. I need to convert it to 4-4-5 to spread the same annual total over a year. Since the calendar monthly amounts vary (increasing each month), simply dividing the annual total by 52 weeks then times 4 or 5 as applicable doesn’t give an accurate picture. Any suggestions?
Are you able to capture the actual specific dates of the expenses? If so, then map the dates to the respective new 4-4-5 column so effectively shift around the buckets. Otherwise, you will have to invent some type of imperfect way to map it to the different format.
Marty
Hi Marty,
Thanks for this most useful tool. Pepsico in Australia has been using the 4-4-5 calendar for close to 10 years now. Only Legacy systems (on older SAP) still use it but it’s my job to set up the calendars yearly.
On the issue of an additional week in a year, we’ve added a 6th week into P13 in previous calendars.
Regards,
Peter