Business Owners- Profit and Loss Statement [Video]
by Financial Design Studio, Inc. / February 16, 2021
Here’s what every small business owner needs to know about the profit and loss statement (P&L). It’s essentially what you make and what you spend to get to your bottom line.
What you make means revenue, sales, and cash inflows. What you spend is what you are buying and what your cash outflows are. Subtracting your outflows from your inflows gets you to a net profit/loss.
Is It Readable?
As a business owner we need to have this set up so it’s readable. We want it to be something we can understand so we can quickly see and summarize what is going on. This statement is over a period of time whether it’s over a week, month, quarter, a year, or several years. Business Owners need to see how the business is doing. This allows us to understand the health of our business.
Next, is it understandable?
Do you have it set up so that you can quickly understand how your business is doing? There are some things you can look at, different summaries that you can put together.
One that you probably have heard of is EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. So essentially it’s all our income. That’s a really good rule of thumb.
These are some important questions to ask yourself. What is my business doing? Can I track it from month to month or year to year. If you need any help setting up a profit and loss statement in QuickBooks or another software please let us know we are happy to help you.
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