By default, the Profit and Loss report in QuickBooks (access via Reports > Company and Financial > Profit and Loss Standard) provides a great overview of your income and expenses for a certain period of time.
However, what if you want to do a bit more analysis and see how each line item on the report stacks up as a percentage of your income? This is a common way to analyze a financial statement as well as a method to start tracking trends in the performance of your business.
TURN ON THE % OF INCOME OPTION
After you create the Profit and Loss Standard report, you'll want to click the "Modify Report" button in the upper left hand corner of the screen.
While there, on the "Display" tab, look for the check box in the lower right hand section of the window that says "% of income". Put a check mark in this box and then click OK. You will see a report that looks like this - a new column has been added to the right:
HOW TO INTERPRET THIS INFORMATION
In the example above, everything in the % of income column is now keyed off the row in the report called "Total Income", or the value of $57,523.91.
A few specific examples:
- The total job expenses for this period represent 37.3% of the total income of the business.
- The total payroll expenses for this period represent 26.3% of the total income of the business.
ARE THESE RESULTS GOOD OR BAD?
Taken by themselves on just one report such as this, it is difficult to say if the percentages are too high, too low, or just right.
This is where you would want to measure these percentages over a period of time to see what the trends are.
In addition, you can take your financial results and compare them to those of others through the use of a site like BizStats.
KNOW YOU NEED THIS INSIGHT BUT DON'T HAVE THE TIME?
In many cases, I know you see the value of this type of information for your business. It helps you keep your finger on the pulse and identify potential problem areas.
However, I also know that you probably don't have the time to spend doing this type of analysis.
Good news! This is one of the services that I perform in my part-time/virtual CFO packages that I offer. I do the analysis and help explain it to you in easily understood terms and keep the mind-numbing accounting jargon to a minimum.
RELATED POST: Profit and Loss Report for Multiple Months in QuickBooks