A profit and loss (or P&L) statement is a representation of whether your business is making or losing money. It shows the revenue (income/sales) that come in and the expenses that are paid out.
Here is an example of what a P&L would look like:
This is a very basic P&L, but it can be broken into further details so businesses can determine which products or services are generating income or losses. Your P&L is one of the main tools that shows how your business is performing.
Why is a P&L important?
It is a clear representation of how a company is performing. You can see what money is coming in (income) and what money is going out (expenses), regardless of whether you have paid for the expenses or not yet.
At a minimum, companies should be looking at their P&Ls on a quarterly basis. And the most important time is to view the statement at year end. This is when you can use your P&L to plan for tax payments, next year’s growth, or even a change in products offered based on their profitability.
Accounting software, such as QuickBooks, will generate P&Ls automatically once transactions are linked into the program and categorized properly. A system like this can be a game changer for a lot of businesses. When you can see the numbers and understand them, it is a great tool to help run your business.
I offer packages that help set up your business for success by tracking your numbers and using that data to make informed decisions to reach your goals. I’d love to talk to you about how I can help your business thrive.