As a business owner, it is important that you know where you stand financially. You need to be able to measure your success so that you can make adjustments necessary to succeed. After all, business owners are in business to make money. While not every business is going to thrive from the beginning, you want to know that your business is moving in the right direction. This can be done with a profit and loss statement. Mark Dicus & Company is here to talk about profit and loss statements and why they can be so valuable for business owners.
Understanding a Profit & Loss Statement
Profit and loss statements are pretty self explanatory. They are in place to show you whether your business or making a profit or suffering a loss when measured over a specific period of time. Profit and loss statements are usually created over a month, quarter, or year. Some people might refer to these statements as income statements. In short, a profit and loss statement is going to tell you if you are making a profit or losing money.
Importance of a Profit & Loss Statement
A profit and loss statement is one of the most important financial documents that a business owner can have. Since it summarizes the income and expenses of the business, it can help business owners make important decisions moving forward. It can help them decide whether or not they can afford to hire employees, whether or not the business model is working, and if the business is able to cover the costs and expenses needed to keep the doors open. When a business owner has a profit and loss statement regularly and on schedule, they will be able to identify problems that need to be solved and make any course corrections essential to thriving.
3 Parts of a Profit & Loss Statement
Every profit and loss statement is going to be made of three different parts:
– Income: Sometimes called revenue, income is going to be a big part of a profit and loss statement. This doesn’t only include the products or services sold either. It can include interest, investment returns, or even income generated from strategic partnerships.
– Expenses: The expenses portion of a profit and loss statement is going to show all the money that goes out. This includes materials, labor, and other costs required to produce what it is that your business sells.
– Net Income: When you subtract the expenses from the income, you will get the net income. This is the money that you walk away with. If this is a positive number, you have made a profit. A negative number means you have suffered a loss.
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
If you are in need of bookkeeping services which would provide your business with a profit and loss statement, you can turn to Mark Dicus & Company to help you understand how successful your business is. Call us today!