What You Need to Know About Your P&L
About this episode
Robert’s plumbing business looks great on the surface: five years in, a growing team and healthy cash flow. But he’s been running it by checking his bank balance on his phone, without ever seeing a monthly profit and loss report.
In part three of the Robert series, Kerry shares how Robert took control of his P&L by hiring a professional bookkeeping firm, why handing QuickBooks to a receptionist or relative often does more harm than good, and what changes once you can see your revenue, costs and profit every month.
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Key takeaways from this episode
- Your bank balance isn’t a reliable guide to how your business is performing.
- Not everyone can do bookkeeping: QuickBooks is more complex behind the screen than it looks.
- Garbage in, garbage out: inaccurate data means unreliable P&L and balance sheet reports.
- Poorly done books can cost more to clean up than doing them right the first time.
- A monthly P&L shows your revenue, cost of goods sold and operating expenses at a glance.
- Knowledge isn’t power on its own: applied knowledge is.
Show notes
Robert’s story so far
Robert has run his plumbing business for five years. It’s growing and cash flow is good, but he doesn’t know his P&L. Like many owners, he makes decisions based on the bank balance he checks on his phone, which can only take a business so far.
Hiring the right help
Instead of handing the books to a receptionist, Robert hired a professional. Kerry explains why the common belief that anyone can do bookkeeping is so harmful to small businesses: entries that look simple in QuickBooks affect your bank register, reconciliations, P&L and balance sheet behind the scenes.
The cost of cleanups
Kerry shares that she’s almost come to believe it’s better not to do your books at all than to have them done badly. Abacus has cleaned up many messy files, and sometimes it’s faster to start a brand-new QuickBooks file.
What Robert can see now
With a bookkeeping firm handling data entry and reconciliations, Robert gets a monthly P&L showing his revenue, cost of goods sold and operating expenses like rent, payroll, fuel and subscriptions, and someone to explain it.
Applied knowledge is power
Knowing your numbers only helps if you use them. Kerry asks: are you making enough on each job, what’s your net profit margin, and what would it take to add another crew?