What Info Do You Get From a Profit and Loss?

[00:00:00] INTRO: Welcome to Financial Snickens, your bite-sized information for entrepreneurs. [00:00:12] Alisa McCabe: Today we are going to be talking about what information you can get from your profit and loss. Your profit and loss is the first report that you should be reviewing every month and comparing it to last month. And a great idea to compare it to last year so you can measure what happened last year at the same time versus this year. [00:00:33] Once your books are reconciled, this report can give you good information to make future decisions. Your profit and loss statement reports the total income that's come into your business, minus all the expenses and gives you your profit. It also is a baseline of the health for your business. It measures these three performances. [00:00:55] How well you generate income on sales, how well you're managing expenses, and are you sustaining a healthy profit margin? So think about those things as you look at your profit and loss. And once you have reviewed the information, you can use it to make decisions on many areas of the company, such as setting prices. [00:01:18] It may change the way you set the price because you're thinking along the lines of how much is my profit margin? If I increase the sale price 5%, how does that affect my bottom line if I can keep my expenses the same? It helps you to talk about developing sales targets so you know how much your sales are month over month, and you might wanna set goals on how to increase those. [00:01:44] You can look at it and talk about forecasting growth. You may notice that some area of your business is growing and you want to be able to forecast that growth. A profit and loss is also needed when you're obtaining loans or finding investors. If you're applying for a loan, a profit and loss statement will be the document that will be needed. [00:02:04] Thinking about finding investors, they will also want a profit and loss statement to see if the company is financially sound. And last but not least, you need a profit and loss to get good tax planning advice. By analyzing the profit and loss statement, you can identify areas where your business is doing well and areas where you need improvement. [00:02:25] This can help you make informed decisions about how to grow your business and how to improve its profitability. Do you wanna learn more about what reports to review or have some questions about your own profit and loss? Hop over to our website firststepsfinancial.com. Click on the Let's Chat button and we can talk more about profit and loss and any other reports that you think you need.