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JUNE
Launch
BEAVERCREEK
11 - Executive Council
Meeting
16 - LEADS! Exchange
17 - MBR Alliance Launch
XENIA
18 - New Member
Orientation
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Profit ...or Loss? |
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While I have your attention, before we start into this week's article we have two important announcement's to make:
1. The name of the Small Biz LEADS! Exchange has been changed
to MBR Alliance or MBR (Mutually Beneficial Relationships) for
short.
This new name better reflects the philosophy and multi-
dimensional aspects of the groups ...the groups focus on so
much more. Although leads/referrals are the ultimate goal
they are a small piece of the overall picture... "relationships" is
the operative word.
2 Small Biz SUCCESS! Network is hosting the Small Biz SUCCESS!
Expo on Thursday, October 23 at Crossroads Expo Center.
This jam-packed, interactive event is the Miami Valley's most
efficient and affordable opportunity for small businesses to
gain powerful visibility and develop new contacts.
Registration for expo attendees and reservations for exhibitor
booths are now being accepted. Click here for more
information.
Now on to this week's topic...
Ask yourself: Exactly how are my products and services affecting my business? How much money am I actually making because of those products and services?
A Profit and Loss Statement answers these and other financial questions. An income statement tells you how your net assets have increased or decreased. 
On an income statement, the total inflow of net assets resulting from the delivery of services and products to your customers is measured in revenue accounts, which in turn tells you what caused the net assets to increase or decrease.
In addition, you can use a statement of income as a tool to compare the most recent year with past trends, thus forming a reasonable forecast for the future.
The statement also helps you locate problem areas regarding sales, margins and expenses, and provides a method for you to investigate problem areas within a reasonable amount of time.
When an income statement is prepared properly, the net increase or decrease in your net assets, or the difference between revenue and expense, is designated as net income or net loss. A net increase in net assets or net income is then added to your equity on your balance sheet.
The Profit and Loss Statement aka P&L aka Income Statement seems to scare the pants off some small business owners. The truth of the matter is you gotta' have it.
Even some of us with QuickBooks have a hard time figuring out what all those numbers mean ...and how they got there.
This is an attempt to make some sense out of the P&L and what it can do for the financial health of your business.
The P&L is just one of the financial statements needed to get a true snapshot of your how well you business is, or isn't, doing. To get a true accounting of the wellness of your business, along with your P&L, you also need a
-Statement of Owner's Equity
-Balance Sheet and
-Statement of Cash Flows.
This week we are just focusing on the P&L.
Click here to view a P&L, Income Statement, template you can actually use. It is very basic and can be used by most self-employed or small business owners.
Put quite simply, a P&L shows
(1) how much money a company made from selling its product (or service) during a given time period (i.e. month, quarter, year, etc.); (2) how much money the company spent (during that same period); and
(3) how much actually it earned for that period.
INCOME
One of the first things that people should realize (and which an income statement clearly shows) is that "revenues" are not the same thing as "earnings." The two terms are used interchangeably by many people. However, they mean very different things. Revenues are the first line on an income statement.
The number in the "revenues" line shows just how much money a company received from its sales.
COST OF GOODS SOLD
From that amount, a company has to subtract all the money it spent to make the product (or service) it sold. Those expenditures are referred to as "the cost of goods sold." (This pertains only to companies that sell products. Service companies typically do not have products so would not need to figure the cost of goods sold.)
Consequently, subtracting that figure--"the cost of goods sold"--from the "revenues" figure, produces what's called "the gross margin."
EXPENSES
Next, a company has to subtract from the gross margin its administrative and selling expenses. This category includes spending for such things as office rent, advertising, office supplies, etc. Subtracting the total amount of those expenditures from the gross margin, results in a number called "before tax profits (or loss)."
THE BOTTOM LINE
Not surprisingly, from that number a company has to subtract the amount of money that it pays the government in income taxes. Doing so produces-- at long last--the bottom line. In other words, the bottom line is "net income (or loss) after taxes." Put another way, it's the amount of money the company actually earned (i.e. its earnings for the time period covered by the income statement).
Those earnings are what it gets to keep and use any way it chooses (i.e. invest in new equipment, pay in dividends to stockholders, etc.)
Therefore, the key thing to remember is that the bottom line refers to how much money is left over once you've paid all your bills.
The Profit and Loss Statement gives us a view of how the business did during the period of the statement. It doesn't say anything about what has happened prior to or after the dates on the statement.
Too, it doesn't help us predict what will happen or how robust the company is today. Therefore, the statement has a very narrow, but important, perspective--One that is used by investors, owners, remember is that there is a difference between a budget and a profit and loss statement.
Your business's P&L can be as simple or as complex as you choose to make it, but the more tracking of expenses you do, the better handle you can have on your business. For example, you can simply include a line in your expense column pertaining to utilities and lump them all together. However, to get a better picture of where your money is going, you will want to break them down into subcategories such as electric, gas, water and telephone.
By keeping them separate you may see a need to bring telephone costs under control by eliminating unnecessary lines that seldom ring or find ways to save on your electric costs. If you deduct for business use of your home, you will have a pretty good idea of what your costs for utilities, rent, insurance and other expenses will be based on the percentage of your home's cost deducted for business use of the home.
Disclaimer: I am not an accountant. It is always good advice to seek the services of a professional. |
| 5 "THINGS TO DO" this week
to build your business... |
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MONDAY, June 9
Do something for your clients/customers who are fathers. Do
something special whether it is sending cards, offering special pricing or inviting them to a "Guy's Night Out."
TUESDAY, June 10
Create a brochure. Sometimes a basic, trifold brochure made with an inexpensive color printer can make all the difference in impressing pros-prospects. "My neighbor hired a gardener because they were the only ones that had a brochure.
Need help with a design? Try inexpensive brochure designing software or the many templates provided in Microsoft Publisher.
WEDNESDAY, June 11
Dig out the business cards you have collected in the past 30 days. Pick the top five who are most likely to become a part of your network or even clients. Call them or email them to make an appointment to meet each one. Talk about how you can help each other's businesses. Follow up.
THURSDAY, June 12
Recommit to working "ON" your business one hour a day. We know. When it is just you, it is really hard not to work "IN" your business. Set aside one hour a day to set goals, check progress, allocate funds, etc.
FRIDAY, June 13
Contact five people who know you but do not know what you do. Briefly but specifically let them know what you do. Ask them if they know of someone who can use your products or services.
Follow up by sending an email, business card, brochure, whatever ...just follow up.
We will send you five more things to do to build your business next week!
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Small Biz SUCCESS! Network
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