How can a simple tool; the Profit and Loss Statement help you grow your business? Learn how you can strategize for success through POS accounting.
One simple tool that aids in assessing where your business stands and which points you need to work on is the Income Statement or the Profit and Loss Statement.
The journey from the present to the future that you see for your business holds many challenges. A profit and loss statement can greatly contribute to effective decision-making. This is because you often need to make decisions to determine the strategy that you need to adopt to ensure that you achieve the future you have dreamed of.
It is widely known that financial accounting and reporting must be incorporated into business decision-making to ensure that you can effectively design an execution roadmap for your business.
Thorough financial statement analysis is quite important when it comes to helping boost your business. Specifically, for retail, modern solutions such as cloud accounting software help set measurable outcomes and determine the degree to which the objectives are attained.
This article will discuss one component of accounting for retail operations: The Profit and Loss Statement.
Here's how a Profit & Loss Statement can help you boost your business and make timely and informed decisions:
Comparing Trends and Performance
You can convert your Profit & Loss Statement into a powerful decision-making tool. If your P&L Statement is comparative, you can view the changes in your business over time. This will help you in comparing the expenses that your business incurs and the changes in profits.
In case your business has seasonal performance, an effective Profit and Loss statement can help you gauge your performance from the same period in the previous years. Therefore, helping you assess if any strategy, marketing investment, or changes you have implemented have paid off.
Deploying an Accounting Information System
An accounting information system can help you divide your accounts into different accounting modules.
Once you get an idea of your revenue-generating centers and which centers incur expenses, you can assess the percentage of revenue that each expense has. This includes both direct and indirect costs, which will provide you with a view of the business activities and how to minimize expenses to improve the profit percentage effectively to improve the profit percentage effectively.
You can use a benchmarking approach to assess your performance compared to the industry average or benchmarking based on previous performance.
An effective P&L Statement also groups expense categories. For example, staff and labor costs can be separated from other expenses to assess their revenue percentage. This can help in improving staffing decisions and managing labor costs such that maximum output is attained.
A balance sheet can further help in assessing the ratio of liabilities to profitability. It is also a useful tool in determining the position of your retail business.
Identify Well-Performing Business Units
The P&L Statement can help you identify the business units that are performing efficiently. This can help you make future investment decisions.
You can also compare the changes made, such as operational or functional level changes that might have resulted in a positive output. This might help you in implementing the same strategy onto other business units.
On the contrary, it can also help identify underperforming business activities. You might decide to change the strategy of these activities or business units or discontinue underperforming units.
Stage and Gate your Current Strategy
If you have implemented a strategy, the stage-gate process or waterfall process can help you identify the performance of different strategy phases. These stages might have different decision-points at every step.
A Profit and Loss Statement will help you compare the performance, so you can have an informed direction when making the decision. Thus, a P&L Statement also helps implement a strategy and not only just analyze pre-and post-implementation performance.
Improve Reporting Time – Cloud-Based Accounting Software
Cloud-based accounting software is being increasingly used by retailers all over the world. Accounting software helps in improving the efficiency of financial reporting.
When the data is directly uploaded to the cloud via a POS accounting system, it is easy to get a real-time analysis of the performance. It helps track the strategy's effectiveness and thus, enabling you to make changes according to the response.
It can help implement the strategy through a stage and gate process. Therefore, it minimizes your investment risk and helps you attain the success you are aiming for.
How to do a Test Run for P&L Statement's Effectiveness?
All in all, a Profit and Loss Statement can help you make informed decisions for your business. Thus, it is a powerful tool that can boost your business. The only condition is the effectiveness of this reporting tool.
Asaan retail has a P&L statement and many other reports and tools that help you make informed decisions. You can customize the way you want your financial statements to be delivered so that you can better strategize at a functional, operational, or corporate level.
What's better is that Asaan Retail provides a Free 15-day trial for you to gauge how Asaan Retail can maximize your business efficiency. So, sign up now!
