Starting a new company means keeping a very close watch over the money coming in from sales and the money going out for things like equipment, workers, advertising etc. Whether just getting started or open for a couple of years, regularly monitoring key details helps owners steer their business smarter. An online profit and loss tracker sheet provides the financial checkup a startup needs to stay on track.
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Why Owners Think They Don’t Need a Profit & Loss Tracker
Many brand-new small business owners wrongly think that tracking profit & loss statements is only useful for big companies. They focus so much on attracting customers and making sales that they overlook their expenses and if they are making a profit. The owners just assume the business is fine as long as money keeps arriving from buyers. Of course profit matters but they leave worrying about costs until later.
This leads to very bad money surprises. Owners suddenly realize they are losing way more than they earn – and it’s too late to easily fix it! One huge study by a top U.S. business university found over 30% of startups fail simply because owners lose control of their finances. They don’t respond fast enough to plug spending leaks or drops in revenue. But just a little bit of regular money oversight prevents this. Utilizing tools like a profit and loss statement template in Google Sheets can streamline this process, providing a clear snapshot of your financial health and helping you make informed decisions to ensure the sustainability of your business.
How a Profit & Loss Tracker Helps Businesses Succeed
Luckily, Google Sheets offers small business owners an awesome free tool to regularly track financial information. A “Profit & Loss Statement” template allows any-sized startup to easily monitor the crucial money details that reveal how the business is truly doing each month.
A Profit and loss statement adds up all money brought in from sales and other income streams in a month then subtracts total expenses like worker salaries, inventory, equipment, etc. By quickly comparing money coming into the business to money going out each month, a Profit and Loss provides an instant health checkup.
Owners can easily see trends if they are earning more than they spend. Simple traffic light color coding flags attention on amounts in the red danger zone based on projections. Noticing declines or unusual spending here makes fixing issues way easier than discovering major problems when it’s nearly too late to save the startup!
Step-By-Step Instructions to Setup Your Own Profit & Loss Tracker
Here is exactly how any new business owner can create their own helpful Profit and Loss Statement in Google Sheets in under 5 minutes:
- Open your Google Drive and start a new spreadsheet
- Name the spreadsheet with your company name and add date ranges that it will track at the top
- Create column headers listing main income and cost categories
- For each month make rows with dates and input actual amounts from invoices for each income/expense category
- Setup formulas to automatically tally totals
- Use conditional formatting to highlight high-priority amounts
- Add charts and graphs to visualize month-to-month trends
Following this template guarantees no business misses risky money issues again. Studies show over 95% of startups who consistently use a monthly Profit and loss tool feel more in control of their company finances and are less anxious about unknown threats.
Making Sure Your P&L Matches Your Business Type
The exact income and expense categories to track differs based on your company’s focus. A retail store selling products need different money details watched versus a professional services firm billing for project hours.
Retail companies should closely monitor costs of goods sold, inventory amounts, and sales tax aside from typical overheads like rent and worker wages.
Service businesses instead track broader revenue metrics like projects contracted and hours billed plus measure profitability on each service offering to guide optimal pricing.
Choose income/expense categories fitting key drivers in your niche. This allows spotting financial changes impacting your specific business model fastest.
Setting Profit Goals and Growth Targets
The main benefit of creating a DIY profit and loss statement is using it wisely to make decisions. Rather than just monitoring the default categories, smart business owners also:
- Set specific profit amount goals they want to achieve each month/year
- Outline expected revenue growth rates as they scale
- Highlight expense areas allowed to fluctuate vs fixed costs
Checking performance against measurable targets uncovers where to re-invest profits back into growth initiatives or find acceptable costs to cut if underperforming.
When To Get Accounting Help
DIY online financial tracking works fantastic for lean early-stage startups. But as companies grow bigger through adding more products, staff, and inventory – the complexity outpaces spreadsheet tools.
Warning signs it’s time to upgrade tracking include:
- Spending over 5 hours per month updating and checking reports
- Experiencing errors from manual data entry
- Lacking expense segmentation by business units/locations
Seeking professional accounting assistance allows founders to focus on customers and innovations by relieving financial admin burdens.
- What exactly goes into the income section of my P&L sheet?
The income section should list all the money your business earns each month. This might include sales, services delivered, products shipped, projects completed or other ways your company makes money. Group similar income types together in columns.
- Should I update my P&L sheet daily, weekly or monthly?
Most small businesses track their profit and loss statements on a monthly basis to get a big picture view. But entering your actual daily sales and spending weekly helps you stay on top of how money flows regularly.
- What should I do if my P&L shows I’m losing money most months?
First, understand why – are expenses too high or sales too low? Then make an action plan to fix it. Either try to increase sales or cut unnecessary costs. Review the numbers against your profit goals. Getting help from a money expert can provide ideas too.
- When do most startups begin using a profit and loss tracking sheet?
Experts recommend setting up a basic P&L sheet right when starting a business even before officially opening. This helps owners define income sources and cost categories and then track projected amounts. Comparing real numbers to the projections shows when issues arise quickly.
Expert Tips to Get The Most From Your Profit & Loss Statement
Financial specialists advise a few extra steps to make sure your DIY Google Sheet money oversight delivers:
- Connect accounting data directly if possible so amounts flow in automatically each month
- Build separate sheets for different business areas if operating in multiple locations
- Schedule monthly calendar reminders to update and review the full sheet
- Compare your profit and loss trends to projections and industry benchmarks
- Share the read-only version with managers so everyone has the same money picture
Following this simple guideline guarantees, all startups continually monitor their fiscal health to catch any issues early…and saves over 1/3 of at-risk small businesses!