Be sure to keep a close eye on your Profit & Loss Statement.
Regularly looking over your income and expenses is a great way for you to monitor and review your business performance.
Xero will let you easily adjust your P&L to show monthly, quarterly or yearly comparisons.
Comparing the different periods allows you to clearly see how much your business has been earning over time. Showing any trends in sales growth or decline.
It will also show what your recurring or fixed costs are on a monthly basis. You can then use this information to plan ahead by creating a budget for your business.
When reviewing you might also notice some expenditure that could be reduced (or cut out completely if not providing any real value) as this will help you to increase your profit.
Your P&L will show you a Gross Profit figure which can help you determine how well your job costing or pricing strategy is working for your business. Gross profit is the business income less the direct costs associated with earning the income. Which could include: Material costs; Labor costs; or the Costs Of the Goods you Sold (COGS).
It will also show a Net Profit figure which is how much your business has left over after all the other expenses of the business have been factored in. Including things like: Licences; Insurances; Motor Vehicle Expenses; & Rent.
The net profit here will be a figure before tax and before the repayment of any debts so you will need to remember that this may not be the exact amount you are taking home when reviewing the P&L but it will still give you a good indicator of your business earnings.
The more you review your P&L the easier it will become for you to identify problems or opportunities. You can then use it to help you to make more informed business decisions!
We always monitor and review the profit & loss statement for our clients. We have regular discussions about their business performance so we can remain proactive when any opportunities or problems arise.
If you are looking for this level of support and guidance with your business or you are simply looking to better understand your P&L then get in touch with us as this is our speciality!