What is P & L?
What is a P&L (Profit and Loss) report?
Raport P&L (ang. Profit and Loss)that is, an income statement is a report showing how net income is converted to net income for each business.
Or even more directly?
P & L this makes it possible to present transparently and at the same time very simply how much the company earned (revenue) and what expenses it incurred during a certain period. At the end of the report, you can see the financial result-profit or loss.
Thus, it is one of the most important tools that allows any business to understand its financial condition.
In practice, the P & L report is a kind of benchmark or roadmap that every entrepreneur thinking about further development of their business should always have at hand.
Based on the P & L report, you can make the most important business decisions-from developing new projects, avoiding servicing unprofitable projects / clients, to optimizing your costs.
Should every company have a P & L report?
The P & L report is an absolutely essential element for effective business management, because it allows you to provide specific data about its financial condition. Its main task is to show whether operating activities bring profit or loss, and how individual costs affect the final result of the company.
Regular creation of such a report helps:
Monthly monitoring and control of income and expenses allows you to quickly respond to market changes, which allows you to better plan your budget and optimize expenses, as well as minimize financial risks.
With access to P&L reports, you can quickly assess whether we are generating enough revenue to cover expenses and generate profit. This feature will allow us to see the moment when we "deviate" from the chosen course, and quickly implement corrective actions.
Based on the P&L report data, the management board can make decisions in the following areas: investment, cost optimization, or development of new business lines, which leads to long-term stability and competitiveness of the company.
Investors most often require a P & L report and make decisions about their investments based on it. Profitability and the ability of an enterprise to manage costs are key indicators for potential investment organizations.
What do we offer in the P & L report?
As a general rule, each P&L report should contain 2 main elements: income and expenses. For the needs of our clients, however, we offer a slightly wider range, including other elements that we have added thanks to the experience gained with our clients.
Income
Revenue is the total value that a company receives from selling its services or products. They can come from different sources, channels, or markets. Our approach to generating revenue data is tailored to the individual needs of our clients. As part of the standard's revenue reports, we offer customer statistics on revenue, providing data such as:
- share of customers in the company's total revenue
- customer trends
- customer location based on the Pareto principle
Operating costs
Operating expenses are expenses related to the company's day-to-day operations. In the basic cost clustering system, we reduce them to:
- Employee salary expenses,
- Customer service expenses,
- Office management costs,
- Training and development,
- Marketing and advertising expenses,
- Other (individual)
Control over the size of costs is, of course, very important, since they directly affect the size of the company's profit. The way this data is presented in tabular form allows you to quickly draw the right conclusions.
EBITDA (earnings before interest, taxes, depreciation and amortisation)
EBITDA is a measure that shows how much a company receives from operating activities before accounting for expenses such as credit interest, taxes, depreciation and amortization. This is the most commonly used metric for analyzing an enterprise's operating results, as it eliminates factors associated with financial and accounting decisions.
Depreciation and amortization
Depreciation is the process by which the value of fixed assets, such as machinery or buildings, is accounted for over a period of time. For example, when a company purchases a car for PLN 200,000, it does not enter this amount as a lump sum, but distributes it over several years, depending on the expected useful life of the asset. Repayment, in turn, relates to intangible assets such as licenses or copyrights.
Operating profit (EBIT)
EBIT (Earnings Before Interest and Taxes) is the value that remains after deducting operating expenses and depreciation before accounting for finance costs and taxes. This is an important indicator that shows how effectively the company operates in its core business.
Profit before tax
Profit before tax is the amount that remains after deducting all expenses other than income tax. It is on this basis that tax liabilities are calculated, which the company must pay to the tax authorities.
Income tax
Income tax is a part of the profit that an enterprise must transfer to the state. The amount of this tax depends on the current legislation of the country and can be calculated differently, depending on the structure of the company's income and expenses.
Net profit
Net income is the final financial result, which shows how much the company earned after deducting all expenses, including taxes. This is a key indicator that tells you whether a company is making a profit or making a loss.
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