Tip #2: Track Your Profits and Losses
One of the world’s most prolific management consultants, Peter Drucker, said it best: if you don’t measure it, you can’t improve it.
The first step toward being more profitable is comprised of two essential components:
- Knowing whether–or not–your business is profitable.
- Knowing how profitable (or not profitable) you are.
This way, you’ll have a firm grasp of where your business stands, giving you clarity and insights on decisions you must make.
Here’s where QBO’s Profit and Loss (P&L) Report shines. Using this valuable tool will give a snapshot of your business’s profitability levels. It removes expenses from your total income, showing you a quarterly, monthly, or weekly bottom-line net income (loss).
Some difficult yet entirely necessary truths might be revealed through such a report.
Consider the following point.
Even if you earned a million dollars in revenue during a quarter, it means nothing if you have two million dollars of expenses (we’re exaggerating to make a point, of course). You might be cruising along thinking you’re doing incredibly well, attracting lots of businesses, when unbeknownst to you, you’ve fallen into a financial sinkhole. The P&L report gives you a chance to flag a potential issue with expenses before things get out of control and can’t be rectified.