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Checklist: Create and use a profit and loss (P&L) statement

Explore our checklist on how to create and use an accurate and effective P&L statement for your business.

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A profit and loss statement (P&L) provides a financial snapshot of a business over a specific period of time. The statement includes business income, operating costs, and expenses used to calculate total business profit or loss for a specified financial period.

P&L statements can help you manage your business better and keep your financials on track. A monthly statement can be used to help monitor the performance of your business against stated projections—reflecting a profit, loss, or break even situation. If problems are identified within the statement you will have a chance to correct before anything gets out of hand.

Use the checklist below to create and use a P&L statement:

Use P&L statement correctly

How you use your P&L statement affects the level of detail required to create the statement. You may choose to monitor only a high level overview of the business, or you may want to break down data by department or product line in order to pinpoint income and expenditure more precisely.

Establish recording systems

Effective systems and procedures need to be set up in order to record the necessary information for inclusion in your P&L statement.

Tip:  Using an accounting software solution, like Sage 50cloud Accounting an easily automate financial recording procedures.

Gather the right information for P&L statements

The following data needs to be gathered to create a P&L statement:

  • All sales invoiced for the period. Sales are based on the date of the sale or invoice date, and not on the actual date on which the customer pays.
  • The value of any stock held. The value should reflect the opening and closing balances. The closing balance may be higher or lower than the opening balance, depending on the sales and purchasing activities during the period.
  • All purchases, except capital items (e.g. machinery or furniture)

Check accuracy

Ensure your figures are correct. Do not include purchases of items that are classified as capital expenditures, such as company vehicles or equipment as they are not directly related to day-to-day operations. You can, however, include an amount to cover the depreciation of the capital items.

Preparing the P&L statement

Once you have gathered all the information required, you are ready to produce your P&L statement. Look online for template examples or if you use accounting software, a P&L statement template should already be available.

Ensure regular preparation of P&L statements

To keep tight control on your business financials, a new P&L statement should be prepared at the end of each month. Some small businesses opt to prepare statements more infrequently, for example, quarterly or half-yearly.

Investigate discrepancies and reconcile

Check for any discrepancies revealed by your P&L statement. Careful monitoring will enable you to identify issues that can impact financial results.