Trailing 12 Months: Definition and How to Calculate It
Trailing 12 months calculations are crucial to measuring your business's performance and tracking seasonal changes.
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A trailing 12 months calculation looks at your business's financial data over the previous 12 months. And you can use it at any point in time — not only at the end of a fiscal year. It's just one of the ways to measure your business's financial health.
Why is the trailing twelve months calculation important?
There are pitfalls to relying exclusively on data from the last fiscal year. For instance, it's outdated. This isn't an issue in the early months of the year. But as the year progresses, the data becomes less representative of your business's current performance.
If you rely on this year to date’s data, your numbers will be more current. But you'll miss out on valuable comparative analysis. You might also get a false sense of your business's performance if your business is seasonal.
This is where trailing 12 months calculations are helpful. They're more current and factor in seasonality, among other things. This can help you see the ebbs and flows in your business. And knowing these will help you make more informed business decisions.
How to do a trailing 12 months calculation
Here's how to run a trailing 12 months calculation for different types of business reports.
For your profit and loss statement and statement of cash flows
Most accounting software lets you set a customized date range for your profit and loss statement and statement of cash flows. To run a trailing 12 months calculation, set your starting date to the first day of the current month — but in the previous year.
So, if you're running the report in July 2025, your starting date would be July 1, 2024. The ending date is the last day of the month prior. In this example, that would be June 30, 2025.
Then, you can use your accounting software to compare your current trailing 12 months figures with the previous period.
For your balance sheet
Your balance sheet is a snapshot of your business as of a certain date. So, you'd just run it as of the ending date of the 12-month period you're analyzing.
When to use trailing 12 months analysis
Trailing 12 months calculations let you account for seasonality in your business. The same goes for changes in income, cash flow or expenses. This knowledge can help inform lots of important business decisions. But trailing 12 months calculations can also be useful if you're seeking financing.
Let’s say your business experiences a significant upswing in income late in the first quarter of the year. You are meeting your commitments to your customers with your existing equipment. But you could be much more efficient — and profitable — if you purchased new equipment. To do that, though, you will need to get a business loan.
Since it's late in the first quarter, your prior year financial statements would be adequate for most lenders. However, these statements wouldn't show the increased revenue for the current year. Similarly, the current year-to-date financial statements would show the increased revenue. But they wouldn’t provide enough information for the lender to make a decision on your loan application.
A trailing 12 months calculation for the current and previous 12 months can show your lender that you have, in fact, seen an increase in revenue. This can help reassure the lender that you'll be able to repay the loan you're requesting. And that can increase the likelihood of them approving the loan.
When not to use trailing 12 months analysis
Be careful if your bookkeeper only makes entries quarterly or annually. If you run the trailing 12 months analysis before they add the entries, it could be inaccurate. Try to get in touch with them before you run the analysis to make sure it's a good time.
You also shouldn't use a trailing 12 months analysis to calculate your tax liability for the current year. This could result in you paying too much or too little in estimated tax payments. Instead, stick with your current year-to-date financial statements to figure your tax liability.
» MORE: Small-business tax guide
A version of this article was first published on Fundera, a subsidiary of NerdWallet.
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