Running your own business can be quite difficult. Aside from managing your sales figures, you would also need to ensure that the whole business strategy is being followed, down to its most delicate details. You also need to manage your employees, the quality of your products and services, and all your customers’ feedback. Indeed, it can really be stressful, especially if you’re the sole owner of your business.
But despite all your stress, despite all of your tasks, there is still one thing that you shouldn’t neglect: your profit and loss statement.
“What Is the Profit and Loss Statement, and Why Is It Important for My Business?”
The profit and loss statement is a form that indicates whether or not your venture was able to acquire a profit. It is categorised as part of your financial statements, and it plays an integral role in indicating your business’ next move. The length in which a profit and loss statement records your numbers spans a certain period of time, which is generally a whole year.
“A Whole Year Seems Too Long. What If I Only Want to See a Specific Portion of the Numbers?”
Don’t worry; you have the balance sheet for that! It is somewhat similar to a profit and loss statement; however, it only covers a particular day within your business.
To simplify, the profit and loss statement is the whole span of the road where your bus rides through on a daily basis, while the balance sheet is just one of the bus stops along the way. The latter would be a quicker way to determine your business’ current standings, but they do not represent all of the needed details, unlike the former.
“Am I Required to Prepare My Business’ Profit and Loss Statement?”
Yes, you are definitely required to prepare and to present it.
To be exact, all publicly traded companies have to abide by this rule. All of your financial statements should be submitted to the Securities and Exchange Commission (SEC), so they may be able to monitor and analyse your profit and loss statement. The SEC’s role is to ensure the protection of your investors, and if they see that you’re having problems with your profits, your investors would be the first to know. This is done not to pressure business owners but to ensure that both you and your investors enjoy fair profits.
This check and balance have been around for a long time, and the SEC will make sure that it stays that way.
“What Can I Get Out of My Own Profit and Loss Statement?”
Having the numbers in your hands would give you a general idea of your business’ performance for the past year. It would also tell you what aspects of your venture needs improvements. As a business owner, it is your responsibility to keep tabs on the numbers so that you wouldn’t miss any opportunity to level up your venture whenever needed.
The profit and loss statements of a business are essential for its consistent improvement. Not to be treated as a mere indicator of sales, negatives, and numbers, it also provides a forecast of where a business may be heading. If the venture was run efficiently, the numbers would be good enough to rack up sales until the next fiscal year. On the other hand, if the losses are way bigger than the investments, the company may have to undergo significant changes and improvements.
If you are looking for trustworthy accountants in London to help with your profit and loss statements, then look no further than Accotax! We are a tax consulting firm, and our clients range from self-employed individuals to large corporations. Contact us for more information about our services.