How familiar are you with the report commonly called a profit and loss statement? You may also know it by one of its many other names: income statement, earnings statement, revenue statement, operating statement, statement of operations, or statement of financial performance.
By whatever name you know it by — know that it is vital to your business. Let’s break down exactly what a profit and loss statement is, and how it can help you achieve your business goals.
Profit And Loss Statement: Defined
A profit and loss statement is a report that compares the total income of a business against its debt and expenses. It indicates the financial health of a company based on three things:
Its ability to generate income through sales
How well it manages expenses
Does the company sustain a healthy profit margin?
If you use Quickbooks Online, you can customize the report. For example, you can select what kind of data you want on the report, add or delete columns, and more. You can even personalize the font and style of the report.
What’s Its Function?
An important aspect of running a business is keeping track of your business finances, and this is where a profit and loss report comes into play. Expenses specifically related to your business are something you need a clear picture of at all times. Aside from tracking how your business is performing financially, a profit and loss statement and the information found in it will serve as a basis for:
Developing realistic sales targets
Setting prices
Revealing how expenses impact profit
Forecasting growth potential
Developing a tax strategy
Attaining loans and investors
Potential lenders and investors will demand a profit and loss statement before they will consider getting involved with your company. They will look at your net income compared with your expenses to make sure your business is financially healthy enough to be on the receiving end of one of their loans or investments.
Of course, having an accurate profit and loss statement depends on having accurate bookkeeping.
Tax Management
The information found in your profit and loss statement will be very important when it comes to determining your tax liability (and helping reduce it!).
It’s advisable to review your profit and loss statement every month to ensure you have a clear picture of where you stand financially and where you stand from a tax perspective. Some items on your profit and loss may not be deductible from a tax standpoint, so we recommended working with a tax professional.
Contact Redmond Accounting
We understand that accounting can be tedious and overwhelming, and that’s why we’re here — to help! Whether you have questions about profit and loss statements, checklists, or technology, or would like your accounting done for you, we’ll assist you every step of the way. Schedule a consultationto find out how we can best support your accounting needs.
Virtual Bookkeeping vs. Traditional Bookkeeping Your business started as a dream, and now it's becoming a reality. It started in your mind, and now you have a business name, a title, a logo, and possibly a store, an office, and even a small staff. You want to take your business to the next level and keep bringing your dreams to…
How Does Outsourced Bookkeeping Work? What kind of business do you have? Are you in the legal, software, or party planning industry? No matter what business you have, when you own a small business, you have the task of running the ENTIRE business. As the owner, you’ve got a lot on your plate. It’s a balancing act to try and…
5 Ways To Know When to Switch to Virtual Bookkeeping If you are a small business owner, you know that time is the most valuable asset. How you manage your time is crucial to the success of your business. Do you spend that precious time ideating your products and services and coming up with new ways to market your business…
3 Reasons You Should Outsource Bookkeeping Did you know that more than ⅓ of small businesses across the country outsource business functions like bookkeeping, IT, and marketing? When you started your business, you likely did so because you had a passion for your product or service and wanted to bring it to the world. Now, you are running a…
Spring Cleaning for Bookkeeping It’s that time of the year again. Don’t let the months go by cluttered with paper. Redmond Accounting went paperless years ago and we’ve never looked back. Save yourself time by getting rid of the endless filing. Even with going paperless, we still recommend doing some spring cleaning for bookkeeping to ensure you always have access…
Virtual Bookkeeping: What You Need To Know As a business owner, do you ever wish you could have a magical genie that automatically organizes your chart of accounts, ledgers, and payroll? Fortunately, the good news is that the genie is a real person, and they are right on the other side of the computer screen! You probably think that we…
Open for Business RAI presents Finance 101 at Square's "Open for Business: Celebrating Women Entrepreneurs" even in SF. On International Women’s Day, the world will celebrate the accomplishments of inspiring women around the globe. On March 10th, Square wants to celebrate you -- amazing women entrepreneurs and business owners in our community. We'll start the evening off with a talk…
Bookkeeping Software, COVID, and the End of 2020 This year has kept all of us on our toes....especially our small business heroes! In 2020, we saw all industries struggling to navigate the new way of running their businesses during the COVID-19 pandemic with limited hours, limited teams, and limited resources. With bookkeeping software becoming increasingly important to success in this…
Virtual Bookkeeping vs. Traditional Bookkeeping Your business started as a dream, and now it's becoming a reality. It started in your mind, and now you have a business name, a title, a logo, and possibly a store, an office, and even a small staff. You want to take your business to the next level and keep bringing your dreams to…
