As a business owner, you’ll need to create financial documents on a regular basis. Among the most important financial documents at your disposal is a profit and loss statement. Available in Quickbooks, it offers an overview of your business’s financial health. Why should you be creating profit and loss statements exactly?
What Is a Profit and Loss Statement?
Also known as an income statement, a profit and loss statement is a financial document consisting of your business’s revenue and expenses for a given period. Most businesses create them on a monthly basis. At the beginning of a new month, they’ll create a profit and loss statement for the previous month. This financial document shows how much money a business generated during this period as well as how much money a business spent during this same period.
Identify Unnecessary Expenses
With a profit and loss statement, you can identify unnecessary expenses incurred by your business. Maybe you subscribed to a second landline telephone that your business doesn’t use, or perhaps you’re overpaying for an office cleaning service. Regardless, a profit and loss report will show these and all other expenses incurred by your business. You can then review your business’s expenses to determine whether or not they are necessary. If you find an unnecessary expense, you can cancel it so that it doesn’t hurt your business’s profits.
Win Over Investors
If you’re trying to secure financing from investors, you’ll need to create profit and loss statements. Investors will look closely at your business’s expenses and revenue. After all, they want to know that your business is capable of growing and increasing its profits. With a profit and loss statement, you can show investors exactly how much your business earns in revenue as well as how much it pays in expenses. Investors will then feel more confident financing your business.
Creating profit and loss statements is easier than you may think. You don’t need any formal training in accounting, nor do you need to hire a professional accountant. As long as you have Quickbooks, you can run a profit and loss statement. In Quickbooks, there’s an option to run a profit and loss statement. Using Quickbooks, you can quickly create a profit and loss statement for any period. As a result, you don’t have to manually calculate your business’s income and expenses.
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