This is often the most heavily viewed report in your accounts. Ideally, you should be looking to have a customised report which makes retrieving your valuable data as simple as possible.
Your income and direct costs should be clearly displayed in order to keep an eye on gross profits, the more controlled these are the more flexibility you can generate with your overheads, cashflow and drawings.Overheads can be one of the biggest pain points in a business and these should be controlled.
So when you view your report; are you getting the information you want at first glance?
If not then you may want to consider the following…
(Please note we will be using Xero for our guide and examples, however, you may find that this information is applicable to you regardless of what software you use).
Changing your Profit and Loss layout
The standard formatting for a Profit and Loss report in many cases is a simple alpha-numerical ordering. Accounts won’t necessarily be grouped in a layout which is truly value-adding to you and your business. To really get the most out of your Profit and Loss it is worth considering how you want this report to be displayed – what is the most important thing for you to track in terms of Sales and Purchases?
Start by viewing your profit and loss account as it currently stands
Your Profit and Loss report will be displayed in the Default layout; if you have not yet set a layout template this may well be the alpha-numerical ordering as mentioned previously.
To really get the most out of your Profit and Loss report we greatly recommend firstly setting up your Chart of Accounts. The idea being you can make every account code unique to your business, however, you can change either of these whenever you need to.
Start by naming your new report. We also recommend setting your first format to the Default option for all users, this means every user your organisation will have the new layout displayed whenever they view the Profit and Loss report.
Now one of the best places to start in designing your value-adding layout is to add groups to your report, as this gives you the option to really highlight sections of importance.
Creating groups for Account codes
Choose what you would like the group name to be called – this is what is physically displayed on your Profit and Loss report.
Next we are simply choosing whereabouts in our Profit and Loss we would like this group to be displayed. Neither of these options are set in stone and you can change their name or placement whenever you need to.
Start off by adding a few Groups of costs or income sources which are important for your business to track. Grouped “Premises”, “IT” and “Staff” costs are generally safe bets for many companies as a starting point.
There is an option to display a summary only, for Management Reporting we recommend leaving this field blank. However, if you have a large amount of account codes which fit into a group or you are showing your Profit and Loss to an outside source who does not require as much detail this can be a really fantastic option going forwards.
Once you have a few groups (represented in Bold), you can check where they are positioned in your report and reallocate them if needed. You can rename any at this point in time, “Edit Group” or “Delete” any unwanted fields.
Now comes the really useful part – assigning your account codes to a group.
Firstly decide which Group you will be assigning accounts too; in this example, we will start off with “Premises Costs”. Choose all account codes which you would like to have assigned to this group by selecting their relevant check-box. Then scroll to the top of the report and select “Move selected accounts…”
Choose which group you would like to have these account codes displayed within and confirm. Carry on this process until you have grouped as many of your account codes as possible.
You may find you have a few fields left over – it is not a problem if these aren’t grouped, they will simply display at the top of the report within the relevant Income or Expense section. Save your layout when complete.
Viewing the result and templates.
Should you need to add new layouts or edit an existing one you will now find you have new items available under the “Layout Options” dropdown list. From here you can access your templates as well as adding new ones.
As you can see by our newly generated report shown below we now have Sub-totals within our overheads category. So not only can we highlight areas of importance we can also see the individual components within, this makes it much clearer at first glance to see if something looks like a cause for concern.
Tips for Powerful Profit and Loss Reporting
|1||Group Income and Expenses based on information which is most useful for you to track|
|2||Try not to be too specific with your group names at first – the more specific you are the harder it will be to assign more than one account code to it.|
|3||How about putting multiple Groups within another larger Group? This gives you sub-categories within a larger summary and is great for breaking down large information.|
|4||How about entering numerical figures such as “01”, “02”, “03” etc. in front of a group name? This can be a brilliant way to change your layout so it doesn’t simply display groups alphabetically and is great for bringing your important groups to the top of your report.|
|5||Perhaps you want a much more detailed layout for management staff and a summarised one for board meetings or the bank? Re-creating your usual report but simply selecting “Summary Only” on all groups is a really good option here.|
|6||Don’t be afraid of changing it. As you add new account codes you will may to assign them to a field, decide whether you want a new group or if you can simply rename one slightly.|