Financial Reporting Best Practices for Food Businesses

financial reports are valuable tools for making strategic and financial decisions and achieving success for your food business. 

Today, we’re focusing on the benefits of using a well-structured Profit and Loss Statement and how customizing this report is a financial reporting best practice that can lead to a substantial increase in monthly profits for your good food business.

In a recent episode of The Good Food CFO podcast, I shared about a client who increased their July profitability from $19,000 to over $42,000 in a single year. That is a FAST turnaround, and a big profit increase that didn’t come from growing sales. The increased profitability came from making changes within the business, and having a well structured Profit and Loss Statement allowed us to jump right in, start analyzing the business and make impactful decisions. 

This post will explore three signs that your financials need a revamp, and could benefit from creating a custom Profit and Loss statement.

3 Symptoms of a poorly structured Profit and Loss Statement:

1. Difficulty Analyzing Your Business's Financial Performance
   If you're struggling to make sense of your company's performance over time, your financial reporting may need a restructuring.

2. Incomplete or Inaccurate Data
   A Profit and Loss Statement that is missing essential information or presenting incorrect figures can negatively impact your decision-making process and overall business performance.

3. Inability to Identify Key Financial Trends
   A well-structured Profit and Loss Statement helps you spot patterns, track progress, and make proactive adjustments. But if you can't see these trends, you may be missing out on these insights and potential opportunities due to poor financial reporting.

Understanding Your Profit and Loss Statement

Your Profit and Loss Statement is a vital tool that provides insights into your business's financial health. It’s not just a record keeping tool for filing taxes at the end of the year!

By examining revenue, cost of goods sold, and operating expenses, you can make the most of your financial reporting, leading to informed decision making and solid planning for the future. Creating a customized Profit and Loss Statement to meet your needs and the needs of your team is the first step.

Customizing Your Profit and Loss Statement: Step by Step

Let's start by getting to know the current version of your Profit and Loss Statement. We’ll identify what is beneficial, what is missing, and what you’d like to see on your custom report.

Step 1: Run your Profit & Loss for the year-to-date.
Also known as an Income Statement in some accounting software, I recommend running this report “by month” if possible. Save a copy to your desktop or print it, as you'll be referring back to it throughout this series of posts.

Step 2: Make a list of what you see, and what you don’t, on your Profit & Loss.
Don’t try to analyze or understand the report just yet, simply note what you see starting at the top and working down. Start simple with things like total monthly revenue, total Cost of Goods Sold, total Operating Expenses, and Profits or Losses.

Take a closer look, what else do you see? What do you wish you could see?

Keep your Profit and Loss Statement and your notes handy.

In the next post we’ll dive into the Revenue section to determine if this part of your Profit and Loss Statement needs a revamp, and the steps you can take to customize it to benefit your business.