Profit and loss reports are a valuable tool for businesses to evaluate their financial health and strategize for future growth and profitability. When presented properly, these reports provide a clear and concise overview of revenue generation, cost management, and profitability, helping you better manage and track your business’s financial operations.
In this article, we’ll discuss profits and loss reports in QuickBooks, how businesses can benefit from them, and how to run P&L reports within the platform.
What is a Profit & Loss Report?
A profit and loss report, also known as an income statement or P&L statement, provides a snapshot of a business’s revenue, expenses, and net income over a specific period. It summarizes the financial performance of a business, indicating whether it is generating a profit or incurring a loss. Profit and loss reports in QBO offer businesses valuable insights into their revenue streams, cost structure, and overall financial health.
Are P&L Reports in QuickBooks customizable?
QuickBooks Online’s profit and loss reports offer a high level of customization and flexibility, allowing businesses to tailor the reports to their specific needs. Users can choose the reporting period, select the accounts and categories to include or exclude, and modify the layout and format of the report. This customization empowers businesses to focus on the key metrics and information that matter most to their analysis and decision-making processes.
Uses of P&L Reports
- Assessing Profitability: By comparing revenue against expenses, the report provides a clear picture of whether the business is making a profit or incurring a loss. This information helps business owners and stakeholders evaluate the financial viability of the company and make informed decisions about its future direction.
- Identifying Revenue Streams: P&L reports allow businesses to analyze their revenue sources and identify the most significant contributors. By categorizing revenue by product lines, services, or customer segments, businesses can gain insights into which areas are driving the most revenue. This information helps in determining where to allocate resources, focus marketing efforts, and identify opportunities for growth.
- Tracking Expenses and Cost Control: P&L reports provide a detailed breakdown of expenses, allowing businesses to track and analyze their cost structure. This analysis helps in identifying areas where expenses can be reduced or optimized. Businesses can make informed decisions on cost control measures, negotiate better supplier contracts, or streamline operational processes to improve profitability.
- Evaluating Financial Performance: P&L reports enable businesses to evaluate their financial performance over a specific period. By comparing current reports with previous periods or industry benchmarks, businesses can identify trends and patterns that may impact their financial health.
- Supporting Financial Planning: P&L reports play a crucial role in financial planning and budgeting as they help managers forecast future financial performance and set realistic targets.
- Facilitating Stakeholder Communication: P&L reports are often shared with stakeholders such as investors, lenders, and shareholders to communicate the financial performance of the business. These reports provide transparency and insight into the profitability and financial stability of the company. They serve as a basis for discussions, decision-making, and building trust with stakeholders by demonstrating the business’s financial health and its ability to generate profits.
How to Run P&L Reports in QuickBooks Online
From your dashboard, click on Reports on the left menu bar, and then select the Reports dropdown. QuickBooks Online displays the report center where you can access all kinds of reports available in QuickBooks, including standard reports, custom reports, and management reports. You’ll also see here the Performance Center, a feature we discussed in a separate article.
Reports Center in QuickBooks Online
You can find the Profit and Loss reports in the Standard tab under Business Overview.
Locate profit and loss report from the Report Center
Click on Profit and Loss, and the system will automatically run a basic report based on default settings. Scroll above the report to locate the top menu bar where you can customize the report. Here you can select the period you want to include in the report, how you want to display the columns (i.e., by total, weeks, months, etc.), and whether you wish to show non-zero or active accounts only. You can also run a comparison report comparing a specific period to another period.
Customizing a profit and loss report in QuickBooks Online
Once done, click the Run report button to generate the report based on your customization preferences. Below is a sample report created in QuickBooks Online.
Sample profit and loss report in QuickBooks Online
Overall, profit and loss reports are essential tools for businesses as they provide a comprehensive view of financial performance, aid in decision-making, support financial planning, and facilitate communication with stakeholders.