How to Read Your P&L Statement
To run a successful business, you have to be able to compare your income (revenue) with your expenses. One easy way to do that is with a Profit & Loss statement. While that may sound like a daunting term, a P&L statement is really just a report on the health of your company — just like the report you get from your doctor after your annual physical.
For the P&L statement to be accurate, you need to plug in some basic information. This is like your doctor recording your vital statistics like blood pressure and temperature.
Two kinds of data have to be entered into a P&L statement. The first is information about your expenses. You have both fixed and variable expenses. Things like your truck payment and insurance are fixed expenses — they never change. Variable expenses like fuel costs, fuel tax and maintenance and repair bills change depending on circumstances. Obviously the more miles you drive the more fuel you will use so some months the fuel number on the P&L will be higher. It is important to include all expenses related to your business on the expense side of the statement.
The other side of your P&L statement is the income or revenue side. That is where you report on how much money you brought in each month from the loads you delivered.
The last part of the P&L statement is referred to as the bottom line. To figure your bottom line profit or loss, subtract expenses from income. If the number is positive, congratulations, you’ve made a profit. If the number is negative, you lost money for that month. If that happens you have to look at either cutting expenses or increasing revenue.
Enter data into your P&L statement each month so you have a running total of both expenses and income. This allows you to see how the year is progressing and to make any needed changes.
In addition, if you’ve set up a budget for your operation, it’s a good idea to compare your P&L statement to your budget so that you can see if you are on target to meet your goals. If not, you need to look at cutting expenses and/or increasing revenue. If you can measure it, you can manage it. A P&L statement gives you an accurate accounting of the state of your business.
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