When it comes to managing the finances of your business, it is essential to be comfortable with certain critical benchmarks.
This "Fantastic Financial Info to Know" series will introduce you to three of them.
CRITICAL BENCHMARK #1 - SEEING YOUR PROFIT AND LOSS WITH A % OF INCOME CALCULATION
Your profit and loss report provides a recap of your income and expenses for a certain period of time, whether it be a week, month or year.
It is also extremely helpful to know not just what the dollars are, but also how all of those line items stack up as a percentage of your business income.
AN UP CLOSE LOOK
The sample report below shows just what a Profit and Loss Report with a % of Income Calculation can look like (click on the image for a larger view):
Using this example, you can quickly and easily see just how significant the various expenses of the business are in relation to the income level.
In a flash, you can see that the job expenses are a bit over 37% of the total income and the payroll expenses are running slightly more than 26% of the total income for the year (this profit and loss report was run for a year-to-date basis for demonstration purposes).
Are these percentages too high? Too low? That is where some historical trends can be very helpful. If you create this same profit and loss on a monthly basis and track some of these key figures, it will then be easy to spot trends (either favorable or unfavorable) in your business finances and then take appropriate action from there.
THE PROFIT AND LOSS WITH A % OF INCOME COLUMN IN QUICKBOOKS
The above report was created using QuickBooks accounting software with just a few mouse clicks and is also available in other accounting software as well.
If you need help getting your QuickBooks organized to provide this type information to you on a regular basis, contact me so we can talk further about your situation.
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