There are three documents that public companies must file quarterly: the balance sheet, the cash flow statement, and the profit and loss statement. Although private companies aren’t required to submit these forms, they are still recommended to provide a good snapshot of current conditions for business owners to always be aware of the health of their business.
A P&L statement is especially useful since it shows the current profit, created by subtracting recent costs from any recent revenue. Although there are plenty of values involved in generating these numbers, especially at larger companies, the final P&L figure breaks them down into a basic sum – literally “the bottom line.” (the grand total is traditionally at the bottom of the template.)
Creating one of these statements and organizing the required data may sometimes feel like a challenge. But there are software options, such as NetSuite, which can assist business owners in compiling the correct info and organizing it so it’s easy to manage and understand.
What’s in a P&L Statement
P&L statements can be shared with shareholders, market analysts, the media, or even staff or ownership. Unexpected or significant changes from the previous report, whether positive or negative, can influence stock performance. A strong quarter with nothing unusual may also show that a company is on a steady course and continuing a trend or improving from a more volatile history.
Greater profits provide more funds to help the company’s growth, pay off debt, shore up weaker areas, or even be returned to shareholders. On the other hand, a smaller profit could be a positive, especially if industry conditions have been challenging.
Generally, others make these interpretations, since the actual report is more about correctly organizing the numbers.
Statements include detailed explanations of expenses, revenue, and profit. These figures can include costs of goods and services, operating income and expenses, taxes, earnings before taxes, depreciation of assets, and interest. They can also include projections for future profit and losses, everything from potential lawsuits to new products or services.
P&L statements can be broken down into different areas, such as profit/loss from sales, expenses, different divisions, or different products. Because these statements are supposed to be created regularly, this can make direct comparisons easy between previous time periods. Similar data can also be incorporated into visuals that are easier to understand.
Types of P&L statements
The format of these documents may vary based on the industry, the intended audience, and any municipal or industry regulations. Common types include:
- Common-size. This turns every line item into a percentage of the overall revenue. This lets readers see all the elements that lead to 100%, and also makes comparisons to other businesses easier.
- Condensed. This is more of an abstract, briefly summarizing expenses by category and referring readers elsewhere for supplemental details on individual items.
- Single-step. This type of statement shares all types of revenue from one group and all types of expenses in another group, and then shows how they combine for the final figure.
- Multi-step. With this document, readers receive additional details, including operating activities and non-operating activities. It can also show details like operating profits, gross profits, and intermediate totals.
- Accrual. This type shares information about pending revenue, such as purchases from clients that have been pledged but not fully paid for.
- Cash. Companies that receive currency from customers or give it to them can document these transactions.
How NetSuite can assist
NetSuite provides a variety of services that can help organize your details and organize the data for P&L statements as often as you need them. Its Financial Management services let company officials access this data regularly. This can help everyone have a better eye on potential losses or gains along with areas of improvement, and always be looking for ways to keep the company profitable.