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What is 4-4-5 accounting?

4–4–5 accounting is a method of managing accounting periods. Accounting cycles, or calendars, define the number of weeks in each financial period in each financial quarter. The 4-4-5 accounting calendar divides a year into four quarters of 13 weeks, each grouped into two 4-week "months" and one 5-week "month".

4-4-5 accounting explained

That means that in each quarter of a 4-4-5 accounting calendar:

  • The first financial period consists of the first four weeks
  • The second period consists of the next four weeks
  • The third period consists of the next five weeks.

This quarter consists of 13 weeks. And four such quarters give you 52 weeks (a full calendar year).

The grouping of 13 weeks may be set up as 5–4–4 weeks or 4–5–4 weeks, but 4–4–5 seems to be the most common arrangement.

What industries use 4-4-5 accounting?

This calendar structure is most frequently used in sectors such as retail, hospitality, publishing and manufacturing.

What are the benefits of using a 4-4-5 accounting calendar?

The major advantage over a regular calendar is that each period is the same length and ends on the same day of the week. Some businesses find this useful for aligning operational forecasts, production schedules, resource planning and budgeting. Consistent, predictable accounting periods, month over month, year over year, can make payroll, prepaid and accrual transactions, annual sales plans, and financial budgets easier to manage.

Are there any disadvantages to 4-4-5 accounting?

Using a 4–4–5 calendar means one month is 25% longer than the other two. That can make month-by-month comparisons, or tracking trends over periods, more difficult. However, you can still compare a period to the same period in the prior year or use week-by-week data comparisons.

Another potential issue is that the 4–4–5 calendar has 364 days (7 days x 52 weeks). That means that approximately every 5 years there will be a 53-week year. This can make year-on-year comparisons more difficult.

If you’re a group company, you will also need to consider the statutory reporting periods for all the countries you operate in.  You may need to make some minor closing adjustments when you consolidate your overall financial results.

It’s essential to ensure your finance system supports a 4-4-5 accounting calendar

Alastair Manson, Group Finance Director with Tindle Newspaper Group, explains how AccountsIQ’s financial management software supports their 4-4-5 accounting calendar.

“Tindle’s publications are weekly, so reporting by week is more meaningful against weekly budgets. The business applies the 4–4–5 calendar accounting method. Our implementation partners, flinder, were able to configure this within AccountsIQ.

“The 4-4-5 accounting method wasn’t achievable with Sage because it runs on calendar months. We always reported in 4-4-5, but that meant we had to shift invoices around in the background which left the process exposed to human error. The implementation team at flinder helped us scope this process when we were designing the system and it performs very well.”

Read the full Tindle Newspaper Group case study.