I wanted to start this series of posts with a little accounting humour. Why did the Auditor cross the road? Because that's what he did last year!
Okay, totally lame—but on the same note, accounting does involve a lot of repetition year after year. You input expenses, add your income, and file your taxes. Then repeat the next year. Or maybe you're one of the many small business owners we hear say; “I’ll just let my accountant deal with all of this”.
Guess what? Doing your bookkeeping is not just for your accountant’s benefit. In fact, there’s quite a bit you can tell about the state of your business that your accountant won’t be able to tell you, even with just ONE REPORT!
So today we are going to talk about my favourite report, the Income Statement, also known as the Profit and Loss report. This report shows you how much you have sold (Income) and have much you have spent (Expense), but I am going to show you how to use this report to see what is REALLY happening in your business, as well as a few tips on what you might do with that information.
The Income Statement
This 4-part series will detail four things the Income Statement can tell you, and in all likelihood, what your accountant won’t tell you (it’s not really their focus, but it should be yours).
How much did you make last week, last month, and last year?
Let me explain a little further. With the Income Statement, you can see your income for any given period of time.
There are times in your business when you might want to know how much money you made, spent, or both over a given timeframe. For example, let’s say you run a promotion for a week. You can run the Income Statement report for the week you ran the promotion to see how much money you brought in. You can even focus specifically on income rather than seeing both income and expenses.
Let’s build on the example above. There’s a saying that people only “respect what you inspect”. So if you tell your employees that you want them to try and sell more during said promo week, you’ll want to run your Income Statement report every day so you can let your staff know what they’ve sold, moreover, what they need to sell to hit the desired promotion’s goal.
Being able to see that with a couple of clicks, then sharing it with your team is just one simple way that you can set and track revenue goals. And knowing what you made is great, but here’s what else the Income Statement can shed light on:
- Was the promotion successful? Should you run it again?
- Was the promotion too long/short or was a specific day better than others?
- Should an employee receive a bonus based on their efforts (or a stern lecture for lack thereof)?
- Which customers bought during the promotion and conversely which ones could you target better?
The Income Statement does tell you what comes in and what goes out, but it also allows you to investigate a little deeper into the health of your business, like how well a certain project or promotion is doing.
How to Create an Income Statement in Kashoo
Sticking with the same example above, here’s how you can run your Income Statement report in Kashoo in 3 easy steps:
As you can see, the Income Statement isn’t something your accountant is likely to dive into detail on, so it’s nice to know you can drill down on the details yourself.
Check out Part 2 of our Income Statement series to see how you can gain a better understanding of your business and make informed decisions so you can grow your small business year after year!