43. Design a Profit & Loss (Income) Statement That Is Relevant To Your Business

SUMMARY

Design a Profit & Loss (Income) Statement That Is Relevant To Your Business

Do you spend too much time reading financial reports? Or too much time trying to find the information you need?

Transcription

Design a Profit & Loss (Income) Statement That Is Relevant To Your Business

So, today we're gonna talk about making relevant financial statements. So if you saw one of our last videos where we talked about the three components of financial statements, being timely, being relevant, and being accurate.

Relevant

 So we want to talk about relevant financial statements, especially for managers who aren't financial. And so when it comes to business acumen, it's all about making faster, better, and clearer decisions. And so, you want your financial statements to be relevant to make better, faster, and clearer decisions. And so sometimes managers who aren't financial, when they look at a P&L, they get confused, or they start looking at some of the little numbers that aren't as important as the larger numbers. So, on the side here and with zero, if you're a small business, you can easily make your own template to design a financial statement that's relevant to you. And if you need any help with that just send us a message.

So this is a typical financial statement. You got your sales, and then your cost of goods sold, you got your purchases, freight, consumables. And then you got all the difficult sorts of things. And sometimes that can just lead to more confusion. So what we want to do is we want to make a financial statement, that picks out, what I call the critical numbers. The numbers that you have to get right for your business to be successful. So there are generally three, sometimes up to five numbers that businesses have to get right for their business to be successful.

Otherwise, if you're not getting those numbers right, there's no point looking at some of these other numbers in your business. So what I would do is, once you start with your sales, you roll up your cost of goods sold into one. And then you make that a percentage of your sales. And so, you add another column, which is a percentage of sales. And so this is where, you gonna be your rule of thumb.

So you can print this report off, and then in a couple minutes know where you need to start looking in your business. So, if your cost of goods sold in your mind, if it's between 45 and 55, or whatever that's probably board for a cost of good sold. If it's here at sort of that range, you know that's where you start to look. Then you start your salaries. And most business salaries is one of the largest. So you roll your wages, your super, all those salary expenses into it, and then you have your percentage on the side that you need to be looking at.

And then maybe rent, what's your rent? How's that comparing to sales? Your marketing, how efficient is your marketing comparing that to a percentage of sales. And then you have your other. And so this is just a much simpler, and I find relevant financial statement, just making things easier.

Because if you're confused you lose. I just wanted to show a simple way, you don't have to follow the standard profit and loss. You can design a profit and loss that's relevant to you and to your business, to make faster, better, and clearer decisions.

If you would like to work with me on developing financial management skills in your business. Talk To Us

Click Here to Leave a Comment Below

Leave a Reply:
%d bloggers like this: