If you are reading this post, you probably own a business or are thinking of starting one. It is a fact that many businesses fail in the first two years. One of the reasons is that the business owner is so busy operating the business that they don’t take time to evaluate what is going on. It is the old adage you can’t see the forest for the trees.
One thing that can really help you evaluate your business and the finances is a profit loss statement. A profit loss statement tells you how much money you have brought in, how much you have spent and what you have spent it on. This information can help you decide if you are spending money on things that will help you grow your business and keep the most money in your pocket.
Let me give you an example of how monitoring your business with a profit loss statement can help you save potentially thousands of dollars by giving you a real life example on one of our clients. This client owned a heating and air conditioning business. He did great work and was always busy because he got many referrals. The problem was that even though he had a lot of work, he never seemed to have any money.
It was a family owned business and his wife tried very hard to keep the bookkeeping straight, but she was very busy with their ten children. They asked us to come in and help them get their records straight. When we were done, we printed a profit loss statement, which shows income and expenses. As we reviewed the statement, we discovered he had spent $12,000 on advertising. We asked how much business he had gotten from the advertising. He said, none.
Wow, $12,000! This is a great example of how keeping your records current and reviewing a profit loss statement on a regular basis can save thousands of dollars and could even save your business.
For more information on profit loss statements and how they can help you monitor your business, check out our CDs that can teach you everything you need to know to keep your business finances in order.