Customizing Your Profit and Loss Statement to Improve Financial Outcomes (Part 1)

Customizing your Profit and Loss Statement puts meaningful financial information your fingertips.

Many think that financials reports like the Profit and Loss Statement are strictly for tax purposes, but they are actually valuable business tools.

The key to making the most of these reports is to customize them to your business.

BUT isn’t their a specific structure that a Profit and Loss Statement has to have?

Yes, every Profit and Loss Statement has the same core structure and three primary sections: Revenue, Cost of Goods Sold, and Operating Expenses.

Within those categories a lot of customization can, and should, happen to help you understand your business and improve financial outcomes.

financial reports should provide value to you, and help you make key strategy + business decisions.

For example, you should easily be able to answer the following just by reviewing your Profit + Loss Statement (aka Income Statement):

• Which line of business is bringing in the most revenue?

• What does it cost to package + ship your online orders?

• What are your total labor costs with taxes, benefits and fees included?

If your Profit + Loss, or Income Statement, isn't providing this type of valuable info about your food business (without having to do side calculations or dig for additional data) you're working with what I call "Basic" financial reports in need of a revamp.

In the last post, I asked you to pull your Profit & Loss report and make some notes about what you see. This week we're taking a look at the Revenue Section of your P&L. 

Signs that the Revenue Section of your P&L Needs a Revamp

Sign #1: You sell in more than one sales channel, but all of your revenue is lumped together in one single line called “SALES” 

Sign #2: Your revenue is separated by sales channel but the separation and descriptions are not meaningful or helpful to you.  

Steps to Customize the revenue section of your
Profit and Loss statement

Step 1: In a separate document, list each of the sales channels you sell in

Step 2: Ensure that the revenue information for each channel can be properly collected and reported by listing out how you bill or process payments for each channel.

Step 3: Don’t be afraid to use sub-categories, but use them wisely. 

Sample sales channels with payment collection information:

Below is a sample of what your sales channel and payment collection list might look like:

• Distribution - invoice through Quickbooks 

• Wholesale Direct - Invoice through Quickbooks

• Markets & Events - Square POS, direct deposit into bank account

• Retail Sales - POS direct deposit into bank account + cash deposits

• Online - Shopify, Direct Deposit into bank account

When to use sub-categories to customize your profit and loss statement

A great rule of thumb for determining when to use sub-categories in the revenue section of your Profit and Loss Statement to determine if you can easily get the information you’re looking for in another app, system or report. If you can, keep QBO simple. 

But, if you need to go to multiple places or run multiple reports to get the detailed sales information, avoid doing that and use QBO to pull it all together in sub-categories.

For example, Facebook/Instagram, Amazon, Tiktok might be good sub-categories of the “Online” sales channel if you have to go to each individual app to see sales and fee reports. 

how to implement these changes

I recommend working through this and the remaining two section of your Profit and Loss Statement, COGS and Operating Expenses, before implementing any changes. This is the most streamlined way to make changes on your own, or communicate them to a bookkeeper if you work with one.

Ready for more? I’ll share the signs that your COGS section needs a revamp and customizations next week.