By Cindy Flanders, Partner, The Profitable Idea LLC
What do small business owners search for more than anything? Information on a Profit and Loss statement. Do I need one? What is the purpose? How often do I need to update it? Why not just balance my check book? How do I create one? The Profit and Loss mystery may be why so many smaller and newer business owners make so little profit and little, if any, income.
As a former banker, the one thing I always emphasize with the small business owners we work with is, “accounting is a must have in your business.” And yet many small business owners, especially solopreneurs, view creating and maintaining a Profit & Loss statement right up there with root canals. But it doesn’t have to overwhelm you. Just remember to keep it simple.
For small business owners who are providing a basic service, such as consulting, workshops, coaching, and webinars, it’s easy to set up a Profit & Loss statement in either Google Sheets or Microsoft Excel Online. Start with listing all your revenue source categories and a column for each month. For Example:
Then list all your expenses. For example:
Even if you have never used Excel, setting up basic accounts in either of these programs is very simple. Here’s the key. It’s important to update the sheet monthly and not wait until the end of the year.
If you are selling a product and have inventory or equipment, such as food items, art pieces, books, or car parts, then purchasing a basic accounting software package like Quickbooks will be the most cost-effective way to keep track of your monthly net profit. Once you set up the Profit and Loss Statement in Quickbooks, remember, you have to update the sheet monthly!
If after trying these online programs or software packages you’re still having trouble, then look for a local accountant or small accounting firm that offers bookkeeping services. You’ll pay more but will know how much profit you’re making or not making and can adjust the business quickly by cutting expenses, super-charging sales and marketing activities, or increasing pricing.
This may seem very basic, but you’d be surprised at how many small business owners think they are managing their business by balancing their checkbook every month. Additionally, if you ever want to get a traditional bank loan, you will need to show them Profit & Loss statements for at least 2 to 3 years. So why not sink your teeth into it and help boost your profitability and income in the long run?
All the best,
Amanda Weathersby, and Cynthia Flanders are Co-Leaders for the Profitable Idea LLC, which is now online!
© Copyright The Profitable Idea, 2023
“The workshop provided me with insight that I have never heard before. I appreciate all the help, kindness, and willingness to guide me through the realistic view of my firm’s financial outlook. I will use the provided tools over and over.”
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