Understanding Your P&L Statement
Today, we’d like to discuss how Moose Creek Bookkeeping services can help your business achieve financial understanding in 2023 and beyond. Every business owner knows how important it is to stay on top of the financials – but two important factors often get in the way of accurate bookkeeping: organization and understanding. In our previous blog posts, we talked about how Moose Creek Bookkeeping can help you maintain organization regarding paperwork, receipts, etc. Now, let’s talk about understanding the most crucial report your accounting software* can generate: Profit & Loss Statement (Aka P&L or Income Statement).
Your P&L statement is a financial report that shows your business’s revenue, costs, expenses, and profit. This information is incredibly valuable – it can help you identify areas where you can cut costs and improve your profitability. Without this information, it’s easy to make uninformed decisions that negatively impact your bottom line.
Let’s break it down. Simply speaking, your P&L is calculated as Income – Expenses = Profit. Depending on the nature of your business, this can be relatively basic, or mind-numbingly complex, and that’s why we are here to help.
Here are the basic categories you will see on a P&L
Revenue: Revenue also called the “top line” of the P&L, is the money that you’re bringing in from your sales.
Cost of Goods Sold: These are the costs that you incur when you make your products or deliver your services.
Gross margin: Gross margin tells you how much money you have left over to cover your expenses after you’ve covered the cost of the product or service you are selling.
Operating expenses: Operating expenses cover all of the expenses that you incur to keep your doors open, excluding your direct costs of goods as above.
Net profit: This is your “bottom line” that you hear so much about. You started with your revenue as your “top line” and then subtracted things as you went: direct costs, operating expenses, and so on. What’s leftover is your profit, or potentially your loss if you ended up spending more than you earned.
Now, your company might fall somewhere between the basic and the mind-numbingly complex when it comes to P&L reports, but either way, we have you covered. Most of our clients are not massive companies with CFOs and Shareholders to scrutinize the books, so we are here to take the deep dive that so many companies are missing out on. Let Moose Creek Bookkeeping guide you through the complexities of financial reports, identify potential issues and offer solutions to improve your business’s current and future financial health. Please give us a call or schedule a free discovery call.
*If you’re reading this and you currently do not utilize accounting software, please reach out so we can discuss some of our recommended platforms for your unique business.