06 Aug Are you ready to run your firm’s profit & loss report?
Do you review your monthly Profit & Loss report, or does the report have little use to you? Let’s talk about what your monthly profit & loss tells you about your firm. Typically at the end of the month, after all, bank accounts have been reconciled from the prior month, a profit & loss report is run.
Let’s start at the beginning – why wait until the bank accounts have all been reconciled? Reconciling is an activity to confirm what your Quickbooks Online (QBO) file shows happened in your checking account, Trust account, or even your credit card account matches what the bank shows happened. Both sources, the bank & QBO, need to be showing the same activity. Think of it as a check & balance for your cash!
What happens if the bank does not show all the activity QBO shows or vise versa? A scavenger hunt begins. Your bookkeeper needs to find out why they do not agree. Is there a missing deposit or a missing payment? The key is, your bank is considered the source of truth for your banking activities.
Once the bank accounts have been reconciled, a profit & loss report can be run with confidence knowing the cash coming into and going out of your firm agrees with your bank.
Fundamentally what is a monthly profit and loss report? It is a summary of total income and total expenses during the month. A profit & loss report has a specific start date and end date and can be run for any period of time.
The timeliness of when the reconciliations are completed will affect when you can confidently run your profit & loss report.
Because a profit & loss report is based on the history of what happened last month, it is called a lagging indicator, but more on that in another blog …..