We at B&J Bookkeeping and Taxes love to watch “Restaurant Impossible” on the Food Network. Often times, the host will ask the struggling business owners about their sales, income, food costs, and other expenses. In many cases, they don’t know, which ends up leading to their current woes. This is why it is so important to have a bookkeeper prepare a profit and loss statement for small business to help you figure it all out.
Bookkeeping Basics of a Profit and Loss Statement
You may take the time to regularly look at your bills, incoming funds, and bank statements. However, you cannot get accurate and actionable data points no matter how much time you spend doing so. The P&L statement will generally include:
- All sales and/or revenue.
- Costs for goods sold.
- Electricity, gas, water, telephone, internet, cable, and other utility costs.
- Any travel expenses or expenses for company vehicles.
- Advertising and marketing.
- Costs associated with full time, part time, and contract workers.
- Sales, administrative, and other general expenses.
- Local, state, and federal taxes.
- Rent, mortgage, leasing, interest, and any expenses for business property.
Your P&L statement may be analyzed for a specific period of time such as a month, quarter, or year. Basically, all data points are divided into expenses and income to determine your profits, if any.
Bookkeeping Benefits of a Profit and Loss Statement
Even a single profit and loss sheet can help you determine your best streams of income, your largest expenses, and everything in between. In the Restaurant Impossible example, the P&L was used to help determine food costs, which helped the restaurant owners select the right price for each dish they sold.
A period over period P&L can help you see which costs and income are changing over time to help you determine the best path forward in the coming year. You may also see important data such as your gross profit margin, net profit margin, and operating margin to determine your rate of return on items such as equity and assets. As in the above, you may adjust the prices for your goods and services accordingly. Best of all, a P&L allows you to perform a trend analysis to determine which of your metrics are improving and which are on the downturn.
We recommend you use a bookkeeper to prepare your P&L statements no matter what the size of your small business. Feel free to click here to view a sample P&L for consideration.
Profit and Loss Statement for Small Business in Houston
Finally, feel free to contact us if you are a small business who needs an expert to prepare a profit and loss statement to help you manage your business and its finances to its potential.
