The income statement is the score card of your business. It provides the owner with a status check of the company’s financial health. In plain English, the income statement reveals how much the company makes or loses each month.
A score card is needed in most walks of life yet I find that the preparation of a monthly income statement is usually on the bottom of the “importance list” for many small businesses.
The booking function is a “non glamorous” chore; it doesn’t bring the satisfaction of making a sale or creating a new product or service. It’s not done in the company of others; it’s a lone responsibility yet it is one of the most important functions that an owner can perform.
The income statement tells you how all the different parts of a business are doing. Marketing has to translate into a profitable bottom line; without the income statement you are only guessing as to the effectiveness of a marketing program.
Whether the company offers a service or a product there are costs related in both obtaining f the product/service and the delivery process. If costs of marketing, purchase and delivery of the product does not yield a positive bottom line, increasing your volume will only increase the deficit.
The accounting function is a discipline that must be learned by most business owners. The alternative is to give that responsibility to an outside provider. Technology has made the bookkeeping function relatively easy, but it has not taken away the commitment needed to maintain it.
For many of my clients I recommend an outside service provider. The cost is relatively minor in the overall budget of the business, and it not only provides the owner with a monthly update on how the business is functioning but also alleviates one of the most nagging yet ignored responsibilities. The cost of outsourcing this responsibility is something that every business should consider until they have grown enough to hire an internal bookkeeper.
If you don’t have a monthly income statement for your business, make sure that you have your first one starting with this month.
Without the financial leg in your business tripod, you more than likely will tip over.
Nick J. Petra CFP www.strategicduck.com www.onebizcentral.com