Profit & Loss Report - How It Helps Your Business Grow
The profit and loss (P&L) statement, also known as the income statement, is an important financial statement for a business that summarizes its total income and expenses in a specific time period. It gives an overview of the financial health of the business. It is more popular than a balance sheet or a cash flow statement as it focuses on profit (loss) and its components.
It helps the business in the below aspects:
To monitor revenue and profit growth over time
To identify the categories where expenses can be cut down
To compare the profit (revenue) with the previous year
Plan the future budgets
The dashboard has two views:
The first tab summarizes the profit and loss statement, showcasing the profit and revenue growth trend over time and the components contributing to the expenses incurred by the business. The second tab is a typical profit and loss statement, with a breakdown of the company’s revenues, expenses, and profits/losses.
|Goals||Questions to ask||Dashboard views|
|Monitor revenue & profit growth
Identify the high-cost, low-revenue points
|How has the revenue grown over time? How does the revenue, cost and profit vary over time?||Revenue, Cost & Margin|
|Identify areas where the expense can be reduced||Which are the components of cost and how are they varying with time?||Breakdown of costs|
|Sales (Profit) growth from previous year||What is the change in net sales (profit) in comparison to the previous year?||Actual Vs. PY MTD|
|To calculate unpaid bills||How much of the expenses are unpaid?||Payment status|
Observing the profit trend over time can help in predicting future profitability. The budgets and other future planning can be done based on this. Revenue growth trend and expenses are also shown to ascertain the relation between profit, revenue and cost.
Profit can be increased only by increasing revenue and decreasing expenses. So the first step towards the latter is identifying areas where expenses can be reduced. Observing the expense pattern over time helps in gaining insights that could help in this.
Comparing the profits with the same time last year can help the business understand how far it has grown in a year. If the numbers remain the same or lesser than that of the previous year, it is a cause for concern, and the business needs to investigate its reasons.
Keeping an eye on how much of the expenses is left unpaid, and how much are partially paid is necessary for calculating the cash in hand requirements. Any financial planning can be done only after checking this figure.
- Revenue, Cost, Margin
- MTD -This year Vs. PY
- Payment status
- Expense Breakdown
The insights from the dashboard help the business make decisions that control the cost of goods sold and the operating expenses to keep the profit margins intact.
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