Base period - What is a base period?
A base period is the period from which a set of data is collected and used later as a comparison for other periods
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A base period is generally a specific point in time in a business’ development from which the numbers are gathered and used later on as a type of benchmark to be used for comparison to other periods.
The base period works as a reference point for future periods. It allows a business to more easily look back at the numbers from that particular period to evaluate from period to period.
Why use base periods
Base periods have become more widespread, beyond their original use in the fields of finance and economics. Base periods are also used in scientific fields, for example.
The spread of their use is due largely to the increased ease of collecting, organising, and analysing data thanks to online software and data systems.
Base periods are useful across different fields because they allow for an easy comparison of data from one period to another. It’s generally advised that this data be somewhat narrow so that clear sets of numbers can be compared for the same specifications later on.
A base period is usually classified by the date range of the period selected. Whether a full year of data on a particular product, or 3 months of data on sales to a certain region, this data can be collected, saved, and used as a benchmark in the future.
Base periods can be a good indication of change, for example, understanding price changes from one period to the next.
Example of a base period
As mentioned, while base periods have typically been used for economic data, they have also expanded to be used in other fields. For example, climate data uses base periods to be able to compare and measure the rate of change.
From an economic standpoint, a base period could be if a company were to gather data on the market prices of a specific type of product or even set of products. The record of these prices would be the base period for that year. This base period could then be compared to the same data from a different period to determine change not impacted by inflation.
For a business, a base period could be the first period in which the number of products and the total sales for each product are recorded. From this base period, the company can then determine the growth of the sales of each product over new periods.
Base periods and Debitoor
The easiest way to get started with base periods is to keep thorough records from the very first day of launching a business. While this might sound like a lot of work, it is easy with online accounting and invoicing software that gives you the option of staying on top of your business accounting from anywhere.
Import and save your product, customer, and supplier list instantly to get started fast. Set your accounting year for your profit & loss, making it easy to start from zero or start keeping online records in the middle of your year.