Profit & Loss or Income Statement?
What’s the difference between these items? Not a darn thing. Regardless of what you call your Business Report Card, I hope you are reviewing by the 10th of each month.
Over and over again, contractors make excuses why they don’t have their financial statements by the 10th of the month…the credit card bill hasn’t arrived yet, I never get my bank statement until the 12th, my primary plumbing supply vendor is behind in getting invoices to me. Get rid of the excuses. Whether you hear the excuses from your administrator or the voices in your head, figure out what is getting in the way and fix it.
In this electronic age, most bank statements can be obtained on line, credit card companies will gladly change the cut-off date of the Credit Card bill, and more and more vendors are e-mailing invoices to their customers to get them in your hands quickly. Get your financials on the 10th so that you can review, identify and correct any negative trends that may surface. Wait until the 15th of the month and the information is already becoming old news. After all the month is already half over by then.
Small Business Advice: Numbers are much more meaningful when compared to something. Once you have your income statement on the 10th, what should an owner review? Here are some guidelines:
- Compare current month to the same time last year. Identify variances year over year. Ensure those variances make sense. Is the company growing? Are costs in line with revenue?
- Compare current month to the company budget. Is the company achieving the planned results? If the answer is no, develop a plan immediately to correct deficiencies or control expenses. If the answer is yes, be sure and thank your team for a job well done!
- Compare Year to Date this year to the same time frame last year. If a company does not achieve their desired plan in a given month, it must not be forgotten. Reviewing year to date information ensures the company continues to work to make up lost ground.
- Do the same analysis as above, by department, if your company is in multiple trades. Are all departments hitting their plan and profitable or is one department covering for another? Financial analysis by department ensures that all departments are carrying their own weight.
- Compare financial data to that of other contractors. Nexstar members can participate in a free member benefit of the Peer Profit Comparison and compare their performance to that of other Nexstar members in their same trade.