Why Small Business Owners Must Monitor Their Monthly Profit & Loss (P&L) Statement

If you own a small business of any type, you must continuously monitor the pulse
of your business. That "pulse" is your monthly profit and loss statement.

A Profit & Loss statement, also known as a P&L displays your company's monthly
revenue and expenses. It shows whether or not your business made a profit or
loss that month. If your revenue exceeds your expenses, you have a profit. If
your expenses exceed your revenue, you have a loss.

On the first day of each month, you should update all receipts into a software
program, such as Quickbooks. This includes sales receipts, monthly expenses and
fixed expenses. Once you've input all the information, you should print out
your P&L statement.

Take a good look at it. Did you make money or lose money? What were your
biggest expenses? Are there any ways you could lower any of your expenses? How
about your revenue? How were your sales compared to last month?

You should know the answers to the questions above.

It amazes me how many small business owners don't really know how their business
is doing. They have no idea if their business is in the red or in the black.
Tax time is not the right time to know how your business is doing. You should
monitor your business at a minimum on a monthly basis.

That way, you can track progress and make small improvements to increase
profitability.

Personally, I've found this technique very helpful in my small businesses. And,
I simply use a Microsoft Excel Spreadsheet to keep my books. It's simple, free
and easy to do.

You can even have someone else do this for you for. You could ask your spouse,
hire a bookkeeper or find a local CPA to assist you.



To learn more about "keeping the books" for your small business, you should visit http://www.charlesholmes.net/Home_Business_Finances.html. Charles Holmes is an author, marketing guru, infopreneur and certified small business coach.