Quickbooks Profit And Loss Template – As a small business owner, how do you measure up in terms of revenue, expenses and net income?
We don’t expect you to know these numbers off the top of your head. However, a quick glance at your company’s profit and loss (P&L) statement will reveal these amounts right away!
Quickbooks Profit And Loss Template
(Of course, this is assuming that your bookkeeping is accurate and up-to-date. If you don’t have the time for this, consider the benefits of outsourced bookkeeping).
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In this post, we’ll explain the basics of the P&L statement: what it is, when you need it, and why it’s important to review it.
The profit and loss (P&L), aka income statement, shows total revenue, total expenses, and the resulting profit/loss from running a business during a given period of time.
In QuickBooks Online: On the left sidebar menu, click Reports. QuickBooks includes profit and loss under the heading Favorites. Adjust the reporting period as needed and click Run Report.
In QuickBooks Desktop: On the top menu bar, click Reports > Company and Financials > Profit and Loss Standard. Adjust the reporting period as needed and click Refresh.
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As you can see from the example above, there are many factors that go into arriving at a company’s net income or loss.
1. Revenue: Sometimes called the “front line” of a company. It is the income earned from the primary business activity of the company.
2. Cost of goods sold: What you paid to produce your product or perform your service — including materials, parts and labor. These are often called “direct costs”.
If you have a manufacturing business, QuickBooks automatically determines the cost of goods sold by reducing the cost of the beginning inventory, as well as the cost of purchases, less inventory.
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Your gross profit or gross margin, which is a percentage of revenue, are key performance indicators (KPIs) that you should keep a close eye on.
4. Operating Expenses: Costs incurred to operate the business, which may include advertising, office expenses, professional fees, utilities, salaries, and any other “overhead” expenses. These are often called “indirect costs”.
6. Other Income/Expenses: These are items that are not related to the day-to-day operations of a business and may include tax expense or miscellaneous interest income.
At a minimum, you need annual information from your P&L to prepare your annual tax return. Your income and expenses must be reported correctly.
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If you need to borrow money, your lender will likely ask for your financial statements to make sure you are in a position to repay the loan.
Internally, it’s good business practice to pull your P&L monthly (or even more often), as we’ll explain below.
Peter Drucker is credited with saying, “You can’t manage what you don’t measure.” Due to the measures of P&L, you will be able to make better and faster decisions with more confidence. To do this, you want to consistently look at the same KPIs from previous time periods. In this article, we suggest three important KPIs for measuring company performance and value.
The sum of your P&L shows your company’s ability to manage sales and expenses. In most industries, you want to target 10% or more of net income.
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Comparing sections of the P&L over time will help you see trends in how well your company has performed. Are revenues rising, but are expenses growing faster? Are there seasonal fluctuations in sales? Is there any way to reduce the cost?
The P&L is one of the three main financial statements that must be reviewed regularly. The P&L, balance sheet and statement of cash flows are the most important tools an owner uses to make decisions about the course and direction of the business.
Looking at these financials together will help you get a complete picture of your company and how everything works together. For example, how can it be that you make a profit, but still have negative cash flow? (We answer here.)
Finally, make sure your sales and expenses are recorded in a timely and accurate manner. (Ready to outsource it? Check out our range of accounting services.) You can rest assured knowing that you have the information you need to answer important questions about your business’s profitability. Online. Accounting software usually allows you to filter in this most basic way. I prefer to extract my information into a spreadsheet (Excel or Google Sheets) to get even more report customization. In this blog article I’ll show you some quick and easy ways to make this data more meaningful.
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(a profit and loss statement). I understand! Reading financial statements isn’t at the top of everyone’s “let’s have a little fun” list – I aim to make them a little less daunting – so I’m going to show you three quick and simple ways to review your profit and loss. Statement (also known as P&L). You can use these tips with any P&L, with any accounting software, and with any business or industry.
To better illustrate my review methods, on the left is a P&L from QuickBooks Online accounting software. This is an example of what an online blogger’s business could look like. Also, please note that the expense details have been rounded up into a “summary” total, and there are footnotes (A, B, C, etc.) to help you keep track.
This is what I do at least every month to understand sales drivers and control expenses. I will also use this time to unsubscribe from any software or subscriptions that I no longer need. The first step I recommend for anyone new to financial review is to review your financials line by line. This allows you to understand what hits each line on a monthly basis, and why it may be different from the previous month. In QuickBooks Online you can run “live” reports and click links on each row to review transaction details.
This is an example of a typical 6 month year view as described above. If it’s January, I suggest reporting from August to January so you still have a solid 6 months of history.
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Eventually you’ll remember this (the numbers you expect to see on each line) and start noticing trends. Soon, you’ll be able to use these numbers as a basis for predicting your results in the future! I like to run the full report year-by-year and for at least 6 months. If it’s January, you need to run an annual report until the current year is more established (this is the 6 months I mentioned – January to August, for example). It helps you to easily see the trends by comparing the current month with previous months. In this example on the right, May sales were $15,000 higher than the previous month because of a specific email campaign the blogger participated in.
Never felt the pure thrill of comparing trends on your P&L! I believe the best way to quickly understand your profit position is to take the key numbers on the P&L and do a quick “comparison” math with them. You can view it in the current year, and even compare trends for longer periods (like numbers up to 3 years together). really go there!
My favorite percentages to calculate are gross margin and profit margin, as they are powerful indicators of a company’s profitability at various control points in the business. Be sure to compare your numbers to industry benchmarks of companies similar to yours. For example, an average profit margin of 66%, as shown for this company, is a great achievement for bloggers.
Gross Margin % = (Sales minus Cost of Sales)/Sales. This percentage shows how much is left after you “make” or “provide” the product and is the starting point for a healthy profit.
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B – Calculation of profit margin: % of profit margin = (Sales minus taxes and all expenses except interest) / Sales. I really like to show this percentage in my visuals as it indicates how well the company is doing operationally. This is what is left over after paying for all the cost of goods and operating expenses. Note, however, that this does not include taxes or interest charged as I want to focus on operating results.
C – Using Year-over-Year Comparisons: In addition to understanding current year trends from Step 1, I like to compare year-over-year totals for each line item. See the visual for how you can calculate and show it.
Calculation: Year’s current totals previous year’s totals = profit or loss for the year (in case of loss is a negative number). You can show these changes as percentages to do even more. In this example, the company’s profits grew 75% over the previous year, which is a great result (and strengthened its profit margin by 12%, which is also important)!
From the steps above, you should have a solid idea of what your main profit makers are (or the things that are slowing you down from profit) – and now it’s the final exercise that brings it all together! see that “under
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