What the Profit and Loss Statement Tells You – Part II Departmental Profits
Would you like to know how cost-effective or profitable each department or team in your company is?
If you’re an advisor or an advanced QuickBooks user reading this, you might say “there’s a feature for that in QuickBooks so that departments show up in the Profit and Loss statement.”
There is. It’s the “class” field.
If the feature is turned on in your file in the preferences section or company settings- named differently in different editions of QuickBooks– it’s an additional field in each transaction where you choose the department from a list you customize yourself. Having this field filled in allows you to run a Profit and Loss Statement by Class– each class’ (department, team, etc.) income and expenses shown in their corresponding columns.
However, for most small businesses out there with little or no staff or self-employeds handling their own books- or in the case of a client I have who’s growing tremendously and the books are too complicated to add yet another field to worry about- I’m going to suggest a different and simpler way to get in the habit of tracking this same information (for the expenses at least) without filling in any extra fields. All it takes is a little “tweaking” in your Chart of Accounts in order to get a Profit and Loss Statement that will give you the information you need and the information you want.
You might be saying, “I’m too small. I don’t have different departments.” No such thing. It doesn’t matter how small of a business you are, it’s never too early to start thinking BIG and doing your books as a big company does. “Dress for the job you want” right?
So, even if you’re a 1-person show, you have departments. You handle business development, product development, marketing, sales, administration, accounting, customer service/client relations/product delivery and quality assurance, right? You’re wearing all the hats, right? Then, you need to track how well each hat is doing. You need to know where you need to cut costs, increase income and/or funding, and let’s not forget you should be tracking your ROI in all of your marketing and sales efforts.
For several clients who don’t have time to track yet another field, I’ve customized a Profit and Loss Statement that looks like this:
The possibilities are endless when customizing this and many other accounting reports. The whole idea is for you to have the answers you need when you need it most. This can also be applied to personal finances, maybe not this detailed, but as detailed as you want it to be. I find myself referring to my personal financial reports a lot when answering questions about my income and expenses and when planning my financial future- ~short-term and long-term.
I’m here to help. If you need help or have questions, ask…and you shall receive 🙂