Use Your Profit & Loss To Track Business Performance!
Regularly checking your profit & loss report is a great way for you to monitor how well your business has been performing over time.
Xero lets you easily adjust your profit & loss Statement to show monthly, quarterly and yearly comparisons so not only can you review your current performance but you can compare performance with previous periods.
Comparing the different periods allows you to clearly see if, and by how much, your income or net profit has been improving over time.
You can also get a good indication of what you regular business expenses are. You can then use this information to start planning 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!