Decoding Your P&L: Building the Foundation

December 5, 2023

Hey there! Let’s get real about your monthly Profit & Loss statement (P&L). It’s not just numbers on a page; it’s the key to understanding how your business is really doing. The P&L spills the beans on your Total Income (the money coming in), your expenditures (COGS & Expenses), and what’s left over – your Net Income, or profit.

But here’s the kicker: your P&L should be more than a financial report. It should be a tool, giving you insights into what’s selling and how your costs align with your revenues. This isn’t just about numbers; it’s about making your business better.

Breaking it down, Custom Integrators make money in three key areas:

  1. Equipment: These are the big components you buy for a specific project.
  2. Install Parts: Wires, cables, brackets – the essential bits for connecting and installing. Keep these stocked because they’re used in every job.
  3. Labor: The skilled services for design, installation, programming, and ongoing service.

Having looked at tons of CI P&L statements, we’ve seen some businesses with tons of income categories and others with just one. The trick is finding the right balance – enough categories for insight, but not so many that it’s a headache. These three, plus keeping an eye on recurring revenues, give you a powerful but manageable dataset for your monthly reviews.

Now, let’s talk expenses – the money going out:

  1. Cost of Goods Sold (COGS): This is what you spend on the actual items for your projects. Break it down further into Equipment COGS and Parts COGS.
  2. Expenses: Covering salaries, spaces, office stuff, and selling expenses like credit card fees and marketing. It’s not chaos; it’s organized into Compensation, Occupancy, Sales Expenses & Administration.

Want a roadmap for managing all this? Download our VITAL Chart of Accounts – it’s like a GPS for tracking and improving your monthly profitability. Find it here.

Stay VITAL,

Matt & the team

Tailored Metrics for Your Business

Ever tried comparing your success metrics with a friend’s, only to end up confused? The VITAL Method sets standard industry practices in accounting, productivity, project management, leadership, bid management, and warranty support.

In our view, business excellence involves systematic approaches, accountability, and keeping a close eye on the numbers. Wondering how to weave these practices into your business? We’ve got you covered.

Embark on Your Data-Driven Journey

Ready to make informed decisions for your custom integration business? Schedule a free 15-minute call with a VITAL Guide – your first step towards a future where your business decisions are rooted in practical data and strategic insights. Dive into the VITAL Method and transform your business today.

Stay VITAL,

Matt & the team

Archives

Contact A VITAL Guide