How to Monitor Profit and Loss
The term “profit and loss” is pretty straightforward, in that is represents the revenue earned by your business and any expenses that have been taken out of its bank account. A profit and loss statement will be for a certain period of time, such as the previous month, quarter or year, and it indicates how your business is performing in terms of net profit.
Though the concept is simple, we speak to many business owners who don’t have profit and loss statements and balance sheets in place. This is a major failing, as P&L is a crucial element in the running of a sustainable business.
Are profit and loss statements just for limited companies?
The short answer to this is no. The longer answer is that regardless of how small and new a business may be, it should always have profit and loss statements and balance sheets that are easily accessible to its owner.
Whether you’re a sole trader, the director of a limited company, working as a partnership or running a not-for-profit organisation, a profit and loss statement shows your turnover, any expenses, and your final profit for that period. This information is invaluable, as it enables you to determine how the business is doing, where you currently stand, what needs to be improved, and even how to cut costs.
What is a balance sheet?
The balance sheet is also imperative to financial best practice, as it gives an overview of the company’s assets (such as property, equipment and land), liabilities (wages, subscriptions and money owed to suppliers), and the value that’s left over, which is your net profit. This is also known as operating profit, as it gives you a concrete figure of your total income after paying all operating expenses.
Still confused? We’re here to help!
Don’t be embarrassed if you still find profit and loss statements and balance sheets confusing, as accounting, bookkeeping, tax planning and financial management are highly complex and time-consuming processes.
Some of our clients find profit and loss too difficult to calculate, others simply don’t have the time, and the occasional few hate the task so much that they leave it out entirely. If any of these scenarios apply to you or you’d simply like a professional accountant to keep you on track, get in touch with the team at TreyBridge today.
Make key business decisions with confidence
Without a profit and loss statement and balance sheet, many actions taken by your business will be a shot in the dark. That’s why professional advice and support always brings a strong return on investment, as it gives you the knowledge you require to plan ahead.
Here at TreyBridge we’re not just accountants, as our role is to act as pathfinders who point you in the right direction and remain with you every step of the way. Our monthly or quarterly management meetings can be held in person or via video call, ensuring that you have everything you need to run a cost-efficient, compliant, sustainable and profitable business and can make important business decisions with clarity and confidence.
We’ll help you to grow your business
Ready to run a more profitable business? Call our Northern office on 01482 235575, our London office on 0207 885 0605 or fill in the contact form below.
Tagged as: Accountancy Tips & Advice
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