Why prepare a profit and loss statement?
Producing regular profit and loss statements (at least quarterly or monthly) will enable you to:
• Answer the question, "How much money am I making, if any?"
• Compare your projected performance with actual performance;
• Compare your performance against industry benchmarks;
• Use past performance trends to form reasonable forecasts for the future;
• Show your business growth and financial health over time;
• Detect any problems regarding sales, margins and expenses within a reasonable time so adjustments may be made to recoup losses or decrease expenses;
• Provide proof of income if you need a loan or mortgage; and
• Calculate your income and expenses when completing and submitting your tax return.