Also called the P&L, a profit and loss statement can help you and your bank get a good understanding of the operating health of your business. It feels like we cover this often, but it is still the most asked question in meetings, and the item I diagram the most.
– Cost of Goods
= Gross Profit
– Overhead Expenses
= Net Profit
This is always Part 2 of the question. What you don’t see on the Profit and Loss are often categorized as “balance sheet” items. Those include:
This means that the remodel you did: that was from profit.
The debt you paid off: that was from profit.
Those patent attorney fees? Straight out of net profit
Business management consultants specializing in accounting will provide unbiased bookkeeping statements for your company according to your industry, and even train your in-house staff on how to maintain these company records.
–by Barb Fisher, Owner and Business Management Consultant, Fisher Business Management
Barb is the CEO of Fisher Bookkeeping, an outsourced bookkeeping consultancy that provides small businesses with a full-service financial department. Her favorite aspect of work is to break down the accounting to meaningful bits, so entrepreneurs can make a powerful difference in their own business. She's also a power lifter (squat: 215, DL: 270).