When it comes down to it, there are two main metrics of any given venture’s financial viability: profit and loss. If your profits (money earned) vastly outweigh your losses (money spent or otherwise depleted), your business is probably thriving. However, if your profits are barely eking out ahead of losses or even dipping down into the red below your losses, the prognosis for your enterprise may not be so positive.
For this reason, reports that calculate profits, losses, and overall income are incredibly important to any company or organization. These statements summarize the signs of your success (or lack thereof), giving you the information you need to devise a clever business strategy. Whether you’re aiming to expand your already-excellent profits or striving to push your business’s books into the black, a profit and loss (P&L) or income Statement gives you the data you need.
In this digital age of business, you probably don’t send handwritten letters, file all your records in a metal filing cabinet, or tally up your expenses on paper – you streamline your operations with advanced technology. Your P&L / income statements should be just as sophisticated as every other component of your company. Excel is the adept application you need to make the most of these essential reports.
What are Profit and Loss (P&L) / Income Statements?
First of all, let’s clarify: a profit and loss (P&L) statement and an income statement are exactly the same type of report. The goal of these documents is simple: to give you a clear picture of your business’s financial functioning, so you can plan and act accordingly. Some business owners might assume that, if they understand their total profits and overall losses, that’s just as good as generating a P&L or income statement, but this simply isn’t the case. Knowing whether or not your enterprise is in the red captures only a tiny fraction of your corporate finances.
Rather, a P&L or income statement aggregates and evaluates the most pertinent facts and figures about your business to paint a picture of your fiscal operations. As Investopedia explains, a P&L or income statement “begins with an entry for revenue, known as the top line, and subtracts the costs of doing business, including the cost of goods sold, operating expenses, tax expense, and interest expense. The difference, known as the bottom line, is net income, also referred to as profit or earnings.” This is why we use the phrase “bottom line” to refer to the core or end result of something. A P&L or income statement aggregates and evaluates the income and expense information at the heart of a company’s financial operating.
How to Use Profit and Loss (P&L) / Income Statements
There are many ways a company can leverage profit and loss (P&L) or income statements to its advantage. A few of these include:
- Financial assessment. While a single P&L or income statement can provide a wealth of data, they are even more valuable in sets. Investopedia notes: “the changes in revenues, operating costs, research and development spending, and net earnings over time are more meaningful than the numbers themselves.” Furthermore, P&L or income statements are often viewed along with complementary reports, such as balance sheets and statements of cash flow.
- Strategic planning. Seeing exactly where your company’s money comes from and what your enterprise uses it for can help you better determine how you want to handle your fiscal dealings in the future. Reviewing a P&L or income statement can highlight costs you want to cut or areas in which you could expand your revenues.
- Transparency and reporting to shareholders. Publicly traded enterprises often release P&L or income statements to their backers on a monthly or quarterly basis. This allows shareholders to provide feedback, understand how the venture they’ve invested in is functioning, and plan for their own financial futures. In this way, P&L or income statements help to build rapport and trust between executives and shareholders.
This is just a sampling of the ways P&L or income statements can benefit businesses. These reports are even more useful when created in a leading software application such as Excel.
P&L The Traditional Way
Decades ago, the only way to create a profit and loss (P&L) or income statement would be to meticulously gather paper receipts, write up paper ledgers, and manually calculate every critical figure. Nowadays, you likely have your financial information stored digitally, but, without the assistance of Excel, you’d still have to find, compile, analyze, and format the data into a readable, actionable report. This process is unnecessarily tedious, taking valuable, productive time away from your accounting staff, executives, and employees.
How Excel Can Propel Your P&L Statements Into the 21st Century
With this state-of-the-art Microsoft application, creating profit and loss (P&L) or income statements doesn’t have to be a difficult, monotonous task. Excel is so often used in this way that Microsoft even provides P&L or income statement templates. In fact, the Australian government’s business department even published a sample P&L or income statement made with Excel. While immensely useful, a template can only take you so far, of course.
The Get Excel Help team can assist you in further streamlining and enhancing this process with the application’s powerful programming. Using our innovative techniques, you can code Excel to automate the entire procedure; once we set up your software, all you’ll need to do is click a few buttons to generate an accurate, attractive, easy-to-read P&L or income statement. Our accomplished team can consult with you about your needs, custom-code a solution designed to suit your distinctive business, and even train you how to use the application better.
Get Excel Help With Your Profit and Loss (P&L) / Income Statements
Our dedicated team of Microsoft software specialists would be thrilled to help you automate and refine your P&L or income statements with Excel. To find out more about this service and our other outstanding offerings, contact Get Excel Help today.