Reviewing your Results: Creating a Profit and Loss Statement in QuickBooks Online

I posted a tip in the first week of January suggesting you may want to run a profit and loss statement to compare the calendar year that just ended, with the prior year.

Then, I thought it may be a good idea to prepare a video to show you HOW to do that! This is also something you can do any time of year – watch until the end, and I will show you how to change the report and compared to prior periods also.

When looking at your results I find it is most useful when you have something to compare to.

Be it the prior month, the same month last year, the year to date compared to the prior year to date, you have context to understand any shifts.

If you have QuickBooks Online up to date and accurate you have information at your finger tips to enable you to make decisions very quickly.

In the video I have made some comments regarding the changes from the prior year. I hope this gives you some ideas about how you can look at your results to quickly identify changes in income patterns, costs, or any other financial factors impacting your business.

The ability to access this information in real time, and not after year end when you prepare your taxes is invaluable!

It is very important that you know all of your bank and credit card accounts are reconciled, and you have checked your balance sheet before you make any important decisions based on your numbers, or file any taxes.  If your balance sheet is not accurate it is most likely that your profit and loss statement will be wrong also.  I have seen sales doubled and very high profits due to bank deposits being recorded incorrectly.  When that was fixed there was no profit.  Download my month end checklist – work your way through that, then run your profit and loss statement.

If you would like to explore running reports for your business, or getting your books in order so you can readily access information don’t hesitate to reach out.

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— Month End Checklist

— Other Resources

Video transcript:

Hi, Kerry here from My Cloud Bookkeeping. I work with small businesses and entrepreneurs to help them get set up in QuickBooks Online and as today run and understand their reports to better manage profitability and cash flow and prepare for taxes at year-end. I posted a tip at the first week of January suggesting you may want to run a profit and loss statement to compare to the calendar year just ended with the prior year. Then I thought it might be a good idea to prepare a video so that you could see HOW to do that. This is also something you can do any time of year. So watch to the end and I'll show you how to change the report to compare to the prior periods also. Regardless of whether your year end is December 31st or not the calendar year end is a great time to stop and take a look at the previous 12 months and compare to the prior year to see if there's anything you learned so you can make any necessary changes quickly in your business and I'll have a link and information at the end of the video to make sure you check that your numbers are accurate. So do be sure to watch all the way through. Let's dive into the sample company to run a profit and loss report and look at the results compared to last year. So, we'll go across to the left here to reports and you'll see it's pretty much always one of the favorites so I'm going to grab the profit and loss statement right here. Now, the default in this file is for the fiscal year to date and one of the great things about QuickBooks Online that differs from other accounting software is that you can run a report for any period that you want. So, let's have a look in the options here in the drop down and I'm going to choose last calendar year so where are we here we are - run the report. Now you can see the results for January to December and a quick scroll shows that we had sales just over $60,000 - $62,000 there and our cost of sales was $28,000 giving us a gross profit of $34,000 which we spent $22,000 near enough on operating expenses giving us a $12,000 profit. Now that's pretty interesting but let's make it more useful by comparing it to the previous year.

So, we first scroll up here to select period. We have the option to compare to the previous year. Now you have to click run report again. I'm not too sure why but I'm leaving that in there so you can see you've done nothing wrong. Now this is where it starts to get a little bit interesting because we can see here that the sales were significantly higher in 2022 than in 2021 however the cost of goods sold here the cost of what it cost us or cost the business to create those sales has increased and it's increased to a greater proportion because we can see here we had a gross profit of $36,000 in 2021 in 2022 it's dropped down to $34,000. Now let's have a look at the operating expenses the same twenty two thousand one hundred twenty one thousand nine hundred and the types of expenses that we have you can see are not the types of things you would expect to fluctuate to a great degree. So what it cost for us to earn the sixty two thousand dollars when we start to look at our cost of sales here was greater. Now another way we can look at this - I ran a report earlier - so let's flip up to this tab is to have a look at the percentage so we can see that in 2022 the cost of sales was 45 of the income and the gross profit was 55. now if we pop to 2021 we can see that it was the cost of sales was only 35% now if this was my business I would be looking at what has changed in here. I'd be looking back into 2022 and I'd see saying why was the cost of labor higher why would the cost of goods sole property materials higher and I'd be thinking about that and I would be less concerned about looking at the operating expenses because they seem to be held pretty flat. So does that give you an idea on how running a report from kind of to compare year to year or to compare with percentages can help you to get information about your business? Now my favorite report while I'm running through the year is to look here and I look and I see how am I doing for this financial year so it's different to the calendar year compared to the previous financial year I'd probably want to run some percentages on this also it looks as though the gross margins run away from itself this year as well. We've spent forty thousand dollars to earn 45 whereas the same period of time last oh no the whole no same period of time last year would spend twenty thousand to earn 56 so it looks like perhaps things are not going as well this year as they did in the prior year. This is where these changes are up in here this is previous year except it's not the whole year so let's previous period. We can run all sorts of things to to change this and have a look and see what's the most useful but what's important is that you are able to get information to help with your decision making when it comes to you know how are you keeping costs under control if sales are increasing? Are other costs increasing that you wouldn't expect to increase? And then you're able to run other reports to look more deeply into what's going on and make better decisions.

It's very important that you know all of your bank and credit card accounts are reconciled and you've checked your balance sheet before you make any important decisions based on your numbers or file any taxes. If your balance sheet is not accurate it's most likely that your profit and loss statement will be wrong also. I've seen sales double, I've seen ridiculously high profits show up due to the bank deposits being recorded incorrectly and when those numbers were fixed there was no profit. So download my month end checklist - there'll be a link down there - work your way through it and then run the profit and loss statement and if you have any questions don't hesitate to reach out comment and if you'd like to book a working session to look at your reports together that would be great too. Don't forget to click like and subscribe and I'll see you next time. Cheers