How to Read a QuickBooks P&L Report
A profit and loss statement is an important document for small-business owners to monitor changes in revenues or expenses
As a small-business owner, you wear many different hats, even if these responsibilities and tasks aren’t your forte. You’re required to hire and fire, present to investors, understand marketing tactics, and many others. One area that a lot of entrepreneurs struggle with is accounting and finance.
QuickBooks helps small businesses track, analyze, and utilize financial reports, like the profit and loss (P&L) statement. This report provides crucial information about the current financial performance and potential future success for a business.
When you’re not as well versed in accounting, QuickBooks makes it easy to view P&L and other financial statements. Here’s what you need to know about P&L and reading the report within the software.
What is the P&L statement?
In general, a P&L statement, or an income statement, shows both income and expenses over a set timeframe (usually quarterly and annually). You’ll see all the money you earned, direct product costs, and the general costs related to running your business.
This data gives you insights into what changed as far as revenues and costs so that better plans can be made, and the current financial state of a company can be assessed. How is the company performing? What are current trends, setbacks, or successes? The P&L statement can help you and your stakeholders answer these questions.
The main purpose of a P&L statement is to see if you’re operating at a profit or a loss. So, for instance, you can see the precise profits you made month to month and assess overall business growth. This is important information when determining the performance of your business.
Reading the QuickBooks P&L report
Some businesses have a staff of financial experts who track profits and losses and make future projections. But if you’re running a small business without those resources or skillsets, QuickBooks makes it fast and easy to access your P&L statement.
You also have the benefit of knowing the information is accurate since it’s automatically populated from your business transactions.
You can view P&L information for any chosen timeframe using the tool. The statement starts with all your income for the selected period listed at the top. Each line item is listed under income, and the total income shows the total amount earned during that time.
Next is the cost of goods sold. These costs are directly related to the goods or services sold during the period. The statement then lists income minus the cost of goods sold, which is another number to watch.
Then, you’ll view expenses. These are general operating costs, like utilities and rent.
You can then view your net income or profit. This is income minus cost of goods sold and expenses. This number is what was earned minus what was paid in expenses over the given period.
Net income will also show up on the balance sheet under equity, alongside other forms of income and earnings. The equity section informs business owners and stakeholders how much a business is worth at a given time – how it’s performing.
The P&L statement is one of the most important financial documents to generate regularly and monitor for changes.
Benefits of using QuickBooks
As mentioned previously, the biggest benefit of using QuickBooks is that small businesses with no accounting experience can use the tool to generate important financial reports. Other benefits include:
· Information is automatically populated and thus more accurate
· Reports are generated instantly
· View financial information for any selected period
· Monitor changes in expenses or income
· Use this information to make better business decisions
· Stay organized with one tool
· Generate reports to bring to pitches or send to investors
When you need accounting or tax management help, Franco Blueprint provides small-business owners and entrepreneurs the help they need to monitor performance and plan for growth. We help you automate your accounting processes, using tools like QuickBooks, so you can focus on growing your business and helping your clients.
If you’re interested in learning how to use QuickBooks, schedule a free consultation, and we can discuss training opportunities.