Have you ever thought to yourself, “Is my business making money”? While the answer may seem simple, it's actually not. Instead of dwelling on the past, you should instead be asking yourself, “What can I do to grow my business”?
You will first need to know how your finances are looking. And the first step to figure out how much your business is really bringing in is to make sure you fully understand your financials. To familiarize yourself with the financial workings of your business, you will to need to look at your Profit and Loss Statement. Since this document lays out how much your business made and how much it lost over the fiscal year, it provides you with a visual snapshot of information that can help you better make decisions. Here are a few ways you can use your Profit and Loss Statement to make business decisions that will grow your company in the next few months and beyond.
Find Pitfalls and Wasteful Spending
For starters, assessing your Profit and Loss Statement gives you a snapshot of what you have earned, as well as any losses. This means you can easily spot any areas you need to cut back on to get your take home in the green.
Analyze Where You are Making Money
Don’t forget that just because a product is selling, it doesn’t mean that it is your most profitable product, and it doesn’t mean you are making money from it. Analyze what products you make the most money from and market those products.
Project Your Profits for Next Cycle
Reviewing your Profit and Loss Statement also helps you make estimates in order to establish short term and long term goals. You can't know where you are going if you don't know where you are.
Stop asking yourself if your business is making money or why you can’t grow your business and instead finally find out the truth. As you can see, understanding financials is a key aspect of responsible business ownership. Keep your Profit and Loss Statement handy when making business strategies, creating plans or laying out goal sheets. You will be surprised just how much you can learn from a simple Profit and Loss Statement!