There are numerous reasons why your business needs profit and loss statements. If you are applying for a business loan, looking for investors or trying to plan ahead for a holiday season, a profit and loss statement is a useful tool.

Before trying to compile your P&L statement or trying to decipher one that was compiled for you, understanding profit and loss statements basics is necessary. Consider the following ideas to help you learn the basics:

1. Understand how to decipher the information presented in the P&L statement.

2. Learn profit and loss statement key terms.

3. Find out how to create your own profit and loss statement.

Action Steps
The best contacts and resources to help you get it done

Know how to interpret profit and loss statements

At first glance, information presented in a profit and loss statement may seem impossible to decipher. Learning how to read the statement can help you know how to prepare your own profit and loss statement. You have to know, for example, that profit and loss statements show hard core financial information about a company can be used to show sales and spending patterns for the company. This can give business owners and management information to base scheduling and inventory on.

I recommend: AccessMyLibrary offers information on how to read and understand a profit and loss statement. This website also offers easy to understand definitions about the terminology used on the statement. Money Instructor offers online lessons and worksheets to help you understand the purpose of a profit and loss sheet and how to read the information presented on the sheet.

Understand basic profit and loss statement terms

Some profit and loss statement terms, such as income and expense, are easy to understand. Other terms, such as balance sheet and fundamental analysis, are more complex. Knowing what these terms mean and how to apply them to your profit and loss statement forms will make compiling the information much easier for you.

I recommend: Ohio State University offers an explanation of common P&L statement terms. Many of the terms have instructions on the proper way to figure the amount that corresponds with the term. Investopedia offers easy to understand definitions of common financial terms, including terms associated with profit and loss statements.

Learn how to create your business profit and loss sheet

Creating your profit and loss statement can be either very simple or very difficult. Using a profit and loss statement template may make your work a little easier. This is especially true if you have only basic financial information to include in the statement.

I recommend: Virtual Advisor offers a profit loss statement template that includes detailed instructions. You can enter information directly into the template on the website and calculate totals for your business profit and loss statement. eSmallOffice offers detailed instructions on how to prepare profit and loss statements. This website offers a sample profit and loss statement sample to give you an idea of what your statement should look like.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Have a financial advisor or accountant go over your P&L statement before submitting it for review by a loan company or investors. One small mistake on the sheet could cost you the money you are seeking.

Whether you are a small business owner just starting off or are considering expanding a business, understanding the fundamentals of basic profit and loss statements is important. A p&l statement will show how well the business is buying and selling products. Statements can show the finances of a company for a month, a quarter, six months or a year.

The basic components of a business profit and loss statement are:

1. Sales projections (one of the more difficult parts of a p&l statement)
2. Cost of goods
3. Controllable expenses such as salaries, advertising, legal expenses and office supplies
4. Fixed expenses such as rent, loans or insurance

When preparing a business statement make sure to know what information makes up a business profit and loss sheet, look at a profit and loss statement example, and search profit & loss statement templates on the web.

Action Steps
The best contacts and resources to help you get it done

Know the proper profit and loss statement format for your business

When just starting out or growing your business it is important to understand what information needs to go into a business profit and loss statement. There are websites designed to help the small business owner by providing information and tutorials.

I recommend: Urgent Business Forms, part of Orion Systems, explains what a business profit and loss sheet is and provides a sample profit and loss statement. The business plan section of HowStuffWorks.com breaks down the components that go into a business profit and loss statement. eSmalloffice, part of Small Business Resources, supports a whole web page on how to prepare a basic profit and loss statement, including information to consider before you start, a checklist and resources link.

Look at profit and loss statement examples

Some websites provide a sample profit and loss statement, so those new to the business sector can see a proper profit and loss statement format.

I recommend: Go to MoneyInstructor.com for lessons on how to prepare profit and loss statement forms, and see a sample profit and loss statement. To help the individual business owner, Small Business Notes provides a sample profit and loss statement and advice on how to start up a small business. The Texas Center for Legal Ethics and Professionalism provides an example of a p&l statement for a law practice in pdf format.

Review a profit & loss statement template, or compare samples on the web

There are many websites that provide blank profit and loss statement template available for download. Some sites provide the template for free, some charge a small fee and some templates are program specific.

I recommend: Microsoft offers their version of a p&l statement on their website available for download. WorkZ.com offers different types of profit & loss statement templates: a basic profit and loss statement, one that allows you to combine up to three departments, and a customized statement. Simpleplanning.com has profit and loss statement format available for a fee; a demo is available for a free download.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you own a specialized business, search non-profit organizations in your industry for profit and loss statements information.
• •  Before expanding a business, look over past profit and loss statement forms to see if expansion is a viable option.

To understand how your business is doing you should be able to decipher profit and loss statements. Education and training is an essential part of reading and understanding a business profit and loss statement. To prepare a profit and loss statement you need to know about the type of income and expenses it tracks. To come up with a bottom line, you subtract the expenses from the income, which will prove whether you have either a profit or a loss.

Getting your accounting or bookkeeping staff familiar with a profit and loss statement template may be the easiest way to train your staff. However, you can also find profit and loss statement examples online and have your staff learn from those.

No matter how you decide to educate and train your staff on profit and loss statements, consider the following:

1. Locate profit and loss statement templates that you can download and use in slides when teaching your staff.

2. Find online training for your staff that emphasizes the profit and loss statement format.

3. Look for sites that explain and give examples of profit and loss statements.

Action Steps
The best contacts and resources to help you get it done

Find profit & loss statement templates or worksheets for you and your employees

Train your staff using a profit & loss statement template or worksheet that you can change for your business needs. There are some lessons you can use to educate your staff on profit and loss statements.

I recommend: The MoneyInstructor.com provides two worksheets for you to practice on that will prepare you for reading and understanding profit and loss statements. RetailBusinessOwner.com provides a retail profit and loss statement you can download and use in Microsoft Excel. Put in your information and it will calculate your profit/loss statement. ESmallOffice offers a template you can use as an example when setting up your own profit and loss statement.

Locate training that emphasizes profit and loss statement forms

Some online training is geared to business forms. This is often true of the basic profit and loss statement because it is necessary for almost all business. You may also arrange for onsite training your employees can attend.

I recommend: Solution Matrix provides an online course, tutoring, a workshop and a seminar where your employees can learn profit and loss statements on-site or at a location near your business. FindaSeminar.com offers profit and loss statements education and training to non-financial professionals who need to understand profit and loss statements too.

Use online sites that teach you the elements of a business profit and loss sheet

Some sites define the ingredients that go into a profit and loss statement and provide examples you can use to create your own blank profit and loss statement. These give your employees greater insight to the process, which will help them prepare a profit and loss statement efficiently.

I recommend: "Creating a Profit and Loss Statement" from Virtual Advisor Interactive explains what a profit and loss statement is, explains the elements of a profit and loss statement, and guides you through using it for your business. AccessMyLibrary gives you all the information you need to learn what a profit and loss statement is. ScoreKnox give you a sample profit and loss statement and explains all the terms that go into it.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  One of the goals of profit and loss statements education and training is to understand the relationship of the P&L statement to the balance sheet.
• •  The business profit and loss statement is for a specific period of time, unlike other financial statements such as the balance sheet, which is for a moment in time.