If you own a small business, you will be actively involved in all aspects of your business. In a single day, you could be the marketing director, hiring manager, and accountant. Therefore, it is important that you learn the basics of all the roles you are likely to play as a small business owner. This will help you perform all your duties without difficulties.
In case you are the one who prepares your business financial reports, you need to have knowledge on basics for the common reports. The common reports are cash flow statement, balance sheet, and profit and loss statement or P&L. however, P&L remains the most essential since it will reveal important data on your current, as well as future business stability. Read more great facts, click here.
A P&L statement is also known as the income statement. It measures your business earnings within a given time compared to how much your business spends or the net loss. Therefore, you can quickly tell if your business is earning or making a loss. With such a report, you can understand your business overall performance. Again, it will be easier to identify areas that need improvement.
If the profits are more than losses, you will have excess funds to reinvest back into the business, use for other purposes, or save for later use. In case your losses are more than profits, it shows that something needs to be done for your business to remain sustainable.
On the other hand, there are timelines of measurement of your P&L statement. However, such measurement is upon the business owner. In most cases, business owners do such assessments regularly and consistent and can be monthly, quarterly, or annually. For very small businesses or new startups, the P&L statement would be a few lines. For bigger businesses, the P&L statement could be volumes.
The length of a P&L statement will depend on the complex nature of your business. For a business with a few income sources and minimal expenses, the state will only take a small space. The document would, however, be longer if the income sources are varied and many. Take a look at this link https://en.wikipedia.org/wiki/Business_plan for more information.
One thing you will need to know is the appearance of a P&L statement. The layout can vary somewhat due to the software used to create the statement. However, the statement would be a basic table. You can, however, use excel, Google sheets or other spreadsheets to create fields and total each section automatically.