How Do You Read Profit And Loss

Guest post by: Stephanie Horne
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The Profit and Loss Statement can tell you a lot about how a business is doing. It can also help you to determine ways that you can go about saving money (so that there is more to bring home!) Your business might not be operating for long if you don't learn to read and use the profit & loss statement (as well as the balance sheet).

One beneficial thing a profit and loss statement can do is to compare the current year's income and expenses to those of the previous year. This would indicate if the decisions you are making are helping you to make more money or less money. The financial statements can also be used by other people in ways that can benefit you or be to your detrimant. An example of this would be when you are presenting your bookkeeping reports to a bank. The banker will look at these financial statements and try to predict how long he or she expects you to stay in business.

The profit & loss statement will basically tell the bank if your business is profitable or not. What you would typically want to see on a profit & loss statement would be a steady amount of growth in revenue and net income.

A sample profit and loss report might look something like this... Sample Profit and Loss Statement

After reviewing it's profit and loss statement, sometimes a business might end up choosing not to grow in order for them to be able to increase their net income. They might also decide to cut back on jobs that aren't making them as much money, or decide not to sell the types of products that are making them less money.

The Profit & Loss Statement is great to review in order to make sure that you are making money and not overspending on job costs or overhead expenses.This would let you know that you are doing well and are right on track for the success that you seek!

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About the Author: Stephanie Horne

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My company, Horne Financial Services, offers a wide range of bookkeeping services while my website is a great resource full of bookkeeping tips that can help save you money, including an online store offering great discounts on bookkeeping software and bookkeeping supplies as well as an accounting definitions glossary and a bookkeeping questions and answers forum.

Below are the services that I offer to my clients along with a brief description. As the list below is by no means all-inclusive, please feel free to inquire about a bookkeeping service if you do not see it listed. If it is not a service I provide, I would be happy to refer you to a qualified professional. * Online Tax Preparation * Tax Services * Bookkeeping/Write-Up Profit and Loss Statement * Balance Sheet * Financial Forecasts & Projections * Cash Flow & Budgeting Analysis * Compilations * Accounts Payable * Accounts Receivable. For more information please visit my Bookkeeping FAQ page. Thank you and all the best to you!

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