Learn more about running a restaurant with our complete guide.
When it comes to running a business, one of the most important things you need to understand is the Profit and Loss statement, or P&L. But what goes into a P&L? What does it tell you about your business? And how can you use it to make more money?
In this post, we’ll explore the ins and outs of the Profit and Loss statement, and show you how to use it to make informed decisions about your business. We’ll cover everything from revenue and cost of goods sold to expenses and deductions. So whether you’re just starting out in business or you’ve been running your own company for years, read on for an in-depth look at the all-important P&L.
Revenue is the money that comes into your business. It’s income from sales, either of services or products. This can be broken down further into different types of revenue such as rental income, interest income or gains from investments. Revenue also includes any discounts you offer on goods and services. When setting up your P&L statement, the top line should list all the earnings for that period.
Cost Of Goods Sold
Cost of Goods Sold (COGS) is a measure of how much it costs to produce or acquire the goods or services you sell to customers in order to generate revenue. It includes expenses such as raw materials, labour costs, transportation costs and depreciation charges associated with producing those items. Understanding COGS is important because it helps you understand how much money you’re making from each sale, as well as how much of your total revenue is generated from each product or service.
Expenses include all the costs incurred in running a business that are not directly related to producing goods or services for customers. This could include overhead such as rent and utilities, advertising costs, salaries and wages, legal fees, insurance premiums and travel expenses. It’s important to track these expenses so you can get a better understanding of where your money is going and identify areas where you can cut back if needed.
At its core, the P&L statement shows you whether or not your business is profitable over a period of time. It provides quick insights into your revenue and expenses, so you can make informed decisions about how to run a more efficient business. By understanding the different elements of a P&L statement, you can use it to identify areas where you can improve profitability and take control of your finances.