Profit and Loss

The Profit and Loss (P&L) report, also known as an Income Statement, is a crucial financial document that provides a snapshot of your business's financial performance over a specific period. It summarizes your revenue, costs, and expenses, helping you understand whether your business is profitable.

Why is the Profit and Loss report important?

The P&L report is essential because it:

• Shows if your business is making money
• Helps identify areas where you can cut costs
• Is required for tax filing and loan applications
• Provides insights for business decision-making

Profit and Loss vs. Balance Sheet

While both the Profit and Loss report and the Balance Sheet are crucial financial statements, they serve different purposes:

• The Profit and Loss report shows your business's financial performance over a period of time. It follows a sequential structure, starting with revenue and subtracting various costs and expenses to arrive at the net profit or loss. There's no balancing equation in a P&L; instead, it tells the story of how your business generated (or lost) money during the specified period.

• The Balance Sheet, on the other hand, provides a snapshot of your business's financial position at a specific point in time. It follows the fundamental accounting equation: Assets = Liabilities + Equity. This equation must always balance, hence the name "Balance Sheet".

Think of the P&L as a video of your business's financial journey over time, while the Balance Sheet is more like a photograph of your financial status at a specific moment.

Key Components of the Profit and Loss Report

Understanding the main sections of your P&L report can help you better analyze your business's financial health:

1. Revenue (income): The total amount earned from your primary business activities
2. Cost of Sales (Cost of Goods Sold): Direct costs associated with producing your goods or services
3. Gross Profit: Revenue minus Cost of Sales, showing how much money you have to cover operating expenses and generate profit
4. Operating Expenses: Costs incurred in running your business that aren't directly tied to production
5. Operating Profit: Gross profit minus Operating Expenses, reflecting the profitability of your core business activities
6. Non-Operating Income and Expenses: Income or costs not related to your main business operations
7. Net Profit (or Loss): The final figure showing your business's profitability after all income and expenses are accounted for

tip

Pay close attention to your Gross Profit and Operating Profit. These figures can help you identify if you need to increase prices, reduce costs, or improve operational efficiency.

Generating a Profit and Loss Report

To create and customize your P&L report:

1. Go to Accounting > Reports from the left menu and select "Profit and Loss"
2. Choose the date as of which point you want to see the report
3. Customize your report using the available options:
   • Compare periods
   • Switch between Cash and Accrual accounting methods
   • Hide empty accounts
   • Divide large numbers by 1000 for easier reading
   • Show or hide unrealized foreign exchange gains/losses
   • Toggle between summary and detailed views

Comparing Periods

Fiskl allows you to compare up to three different time periods:

1. Click on "Compare" after selecting your initial period
2. Choose additional periods to compare
3. View differences in both monetary and percentage values

This feature helps you track your business's performance over time and identify trends or anomalies.

Cash vs. Accrual Accounting

Fiskl offers both Cash and Accrual accounting methods for your P&L report:

• Cash: Shows income when payment is received and expenses when they're paid
• Accrual: Records income when earned and expenses when incurred, regardless of when cash changes hands

Which method should I use?

Learn more about the differences between Cash vs Accrual accounting and how you can easily switch between them in Fiskl.

Analyzing Your Profit and Loss Report

To get the most out of your P&L report:

1. Review regularly: Monthly or quarterly reviews can help you stay on top of your finances
2. Compare to previous periods: Look for trends and seasonality in your business
3. Analyze ratios: Calculate metrics like gross profit margin and operating profit margin
4. Investigate variances: If you notice significant changes, dig deeper to understand why
5. Use it for forecasting: Your P&L can inform budget planning and financial projections

note

Click on any total in the detailed view to drill down to all related transactions, helping you investigate specific entries.

Exporting and Sharing Your Profit and Loss Report

Fiskl makes it easy to share your P&L report:

1. Export to spreadsheet:

   • Click the export button at the top right of the screen
   • Choose between Google Sheets or Excel format

2. Create a PDF:

   • Click the print button at the top right of the screen
   • Save as PDF or print a physical copy

All exported reports include a date and time stamp, as well as the selected accounting method.

Adding Notes to Your Report

To provide context or explanations for your financial data:

1. Click on the note icon at the top right of your screen
2. Add your comments or explanations
3. These notes will be included when you export or print the report

Remember, your Profit and Loss report is a powerful tool for understanding your business's financial performance. Regular review and analysis can help you make informed decisions and drive your business towards greater profitability.