The P&L (profit & loss), or income statement, is simply a report of your revenue minus your expenses, which equals profit. As my last blog post explains: profit is not cash but the theory of cash.
Your P&L is like a movie of a period of time in your business. Your P&L is a lagging indicator of what has already occurred in your business in the previous month, quarter, or year to date (YTD). It is essentially an old movie since you tend to get the information weeks after the month or quarter has closed.
The most effective use of your P&L is as a comparison tool to see how your business is doing compared to the previous month, quarter, or YTD. What is most effective is to compare it to the same period of time for the previous year or several years to measure progress in your business.\
As a business owner, it is imperative that you understand your P&L and use it as a comparison tool to help you to ask better questions to make better decisions. If you would like help understanding your financials, give us a call. 503-312-3145
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