Do You Need a P&L?

Do you need a P&L (Profit and Loss statement) to effectively manage you B2B service business?  Probably not.  This advice probably sounds contrary to what your accountant has been telling you.  However, the truth is, most small service businesses cannot justify the time and expense that generating a P&L requires.

Preparing a P&L involves using accounting software.  Using accounting software (Quickbooks, Peachtree, etc) involves a fair amount of care and feeding and for most non-accountants, assistance from their CPA (read $$).

A typical, 1-5 person service business should be able to determine the financial health of their business by  reviewing the following key indicators:

* Cash in the bank.  Is my bank account balance growing or contracting.

* Accounts Receivable.  Breakdown your AR into aging buckets 30-60-over 90 days. Take aggressive action to collect anything over 60 days.

* Billing History.  Look at your total billings for the last four months.  Are they trending upward or down?

* Expenses.  These should always be kept at the bare minimum.  Low overhead is the key to survival.  If you need accounting software to track and manage non-billable expenses, you have way too many expenses / overhead.

Keep the focus on clients and generating revenue…….and stop pretending you are a part-time accountant!

To your success,

Scott