One of our goals at Tandem Business Solutions is to provide an updated and accurate P&L report to our clients 2 weeks after the month end, being fully updated to the previous month.
This then provides our clients with a clear picture as to how their business is performing and in a timely manner to enable them to make informed decisions or corrective actions.
An accurate and updated P&L is essential to provide other tools such as Forecasting.
Why do I need a P&L Review?
Reviewing a Profit and Loss (P&L) review is crucial for businesses because it provides a clear snapshot of their financial health. This review helps identify trends in revenue and expenses, enabling business owners to make informed decisions about cost management and investment opportunities. Regular P&L reviews can highlight areas of concern, such as declining sales or rising costs, allowing for timely corrective actions. Ultimately, understanding the P&L statement supports strategic planning and ensures the business remains profitable and sustainable.
What happens during a P&L review with Tandem?
During a P&L review with a client recently, following a very successful financial year, they expressed an interest to introduce a bonus scheme for their employees.
They wanted to provide an incentive for their hard-working members of staff.
Of course the question arose, “can we afford it and what will the impact on our profit margins be?”
With their accounts being up to date we were enabled to provide a forecast for the next 12 months, working on the previous year’s actual figures, with the agreed uplifts and decrease’s including a projected bonus payment. As they are quite a large company with a number of employees, it really was not the case of just forecasting the actual bonus amount.
Working on the P&L forecast we added not only the bonus amounts, but Pensions and Employer NI increases as well. The process was relatively simple, because the P&L was up to date and accurate, with all the expenses posted to the correct accounts. The client wanted this ASAP due to the fact they wanted to introduce the bonus scheme as early as possible into the new financial year.
Sometimes it is very easy when introducing a scheme such as this to have a ceiling amount of say £100 bonus per person for this level of sales and a bottom tier of say £10 per person for this level of sales. However, my client being very knowledgeable around the P&L wanted to offer a sustainable scheme, with all costs included, making it a win-win scenario. A fair and sustainable bonus scheme was introduced before the end of Month 1 of the financial year.
The P&L Forecast, alongside a cash flow report enabled my client to make this important and informed decision.
How are Tandem are essential to guiding your business with P&L reporting?
At Tandem we inform business owners that we are the Sat Nav for their businesses and will guide them to their destination in business.
As you can see, we are all aware the P&L report is a very important tool for every business owner and should be reviewed on a regular basis. By regularly examining your profits and expenses, you can identify trends, control costs, and make informed decisions to improve profitability. This review helps you spot issues early, such as declining sales or increasing expenses, allowing you to take corrective action promptly. Ultimately, understanding your P&L report ensures your business remains financially healthy and sustainable.
How can I get further help with understanding my P&L?
As I keep mentioning how important a review of the P&L report, is it the most important report to review?
It is very important, however, to really gain insights into your business any review MUST include the Balance Sheet as well.
If you would like to find out more on how Tandem Business Solutions can assist you in getting to your business destination please click on the Book a Call link.
If you would like to read the P&L Part One blog, you can find it here: Profit and Loss Report Part 1