Summary

Chapter 15: The Bottom Line - Page 15.4

Expenses in the Profit and Loss Statement

Expenses start with personnel, shown as Payroll. Then you have rent, utilities, equipment, payroll taxes, and probably some advertising, maybe commissions, public relations, and other expenses.

What we're leading to is profits. Profits are what is left over after you start with sales, then subtract cost of sales, expenses, and taxes.

An example of a more detailed Profit and Loss Statement is shown in the illustration on the previous page. This example divides operating expenses into categories, including Sales and Marketing expenses and General and Administrative expenses. It provides a breakdown of the business expenses and what they stand for.

Regardless of which statement style you choose, you make very important choices as you plan your profit and loss. This is where you estimate expenditures across the business, from rent and overhead to advertising, sales commissions, and public relations. Decisions you make here are as important as the mathematics are simple. Your sum of expenses ultimately determines your company's profitability. This is the business plan equivalent to budgeting, as you set your sights on the levels of expenditures you expect your company will need.

Summary

Your profit and loss statement is where you budget and forecast your expenses. You also absorb the more important numbers of your sales forecast and personnel plan, to create a planned bottom line for profit. This is educated guessing. Keep it on a computer so you can revise often as the business changes.

[Home] [Buy this Book] [Links] [About the Author] [About this Site] [Site Map] [Contact]