Monthly Profit and Loss Template
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Profit and loss (P&L) statements (aka, income statements) provide an overview of the revenues and expenses your business incurs over a certain period.
Monthly profit and loss statements provide better insights about the operating position of a company than an annual profit and loss statement, which only shows the yearly results. Viewed on a monthly basis, a P&L enables a company to stay flexible and respond to issues and trends quickly.
Our free, downloadable monthly profit and loss template is designed to help you assess the financial position of your company on a monthly basis. It allows you to track your Cost of Goods, Income Streams, Operating Expenses, and more, so that you can track them in near real time, and respond to them before they get out of hand or before opportunities are missed.
The template can easily be adjusted for small, medium and large enterprises by adding or deleting rows. Read the full article for step by step instructions on how to use the template for your business.
What is Monthly Profit and Loss?
Monthly Profit and Loss statements, also known as income statements, are financial statements prepared by a company to assess its financial performance. They are always prepared over a period of time - monthly, quarterly, yearly, etc.
Under the statement, all incomes and gains are credited and all expenses and losses are debited to show the result in the form of net profit or net loss.
P&L’s can be used to monitor an organization’s revenue growth rate, or to make decisions with respect to cutting the costs, raising investments, applying for a loan, or assessing the profitability growth over different months to track seasonal performance.
Several metrics that can be compared using our P&L template are gross profit margin, EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, operating ratio, Cost of Goods Sold and net profit margin.
For more information on profit and loss statement, click here.
How to Use the Template
Separate sheets have been created for manufacturing and service organizations. You only to fill in your estimated or actual revenues and expenses, and our algorithms will do the rest of the math for you, and populate the necessary fields.
Although revenue and expenses vary based on the nature of a business, we have identified some common revenue streams and expenditures.
Some expense items will be the same for both manufacturing and service organizations, while others may exclusively be for either of the two. One example is direct cost; there is usually no direct cost (such as material) for service companies, while manufacturing companies always have direct costs.
Some of the line items identified by us are:
1) Company Name/Logo and Financial Year Beginning
Populate the column with actual date from where you want to start the revenue analysis and the name of the organization for which the calculations are to be made.
E.g., if you want to start operations on 1st January, 2019, you have to input the date in the relevant column and the next 12 months will automatically populate, as shown in the picture below:
This section contains revenue or sales figures from different segments. The aggregation of revenue from all these segments is referred to as total sales or total gross revenue. The amount of sales revenue will of course vary based on the size of the business.
The primary revenue generation activities of a company are recorded under this heading. If the company is earning revenue from more than three products or services, additional rows can be added to reflect that.
You will need to replace the revenue type 1, 2 and 3 with the actual revenue streams. Some examples of revenue generation activities are:
- Revenue from sale of mobile phones,
- Revenue from sale of accessories,
- Revenue from sale of other electronic items,
- Fees from professional services, or
- Commission on brokerage services, etc.
The amount of revenue that has not been realized in cash is called “Accounts Receivable,” and shown in the balance sheet as “Current Assets.”
To learn more about different revenue streams in detail, click here.
3) Cost of Goods Sold
Costs incurred to bring a product to a salable condition are referred to as “Costs of Goods.” For manufacturing companies. this usually includes costs of raw materials, direct labor, freight paid, manufacturing overheads, and distribution costs.
Service sector industries – such as audit firms, legal firms, real estate offices, stock brokers, consultants – often have no Costs of Goods Sold or inventory.
Inclusions: Cost of Goods Sold is also known as direct cost, prime cost, cost of sales. It can be calculated with the following formula:
Cost of sales = Opening stock + purchases – closing stock
Cost of Goods Sold is a combination of fixed cost and variable cost. Variable costs change with the number of products to be manufactured, while fixed costs (such as rent and payroll)remain the same.
Further Analysis: Gross Profit is obtained by the subtraction of Cost of Goods Sold from the total revenue. The higher the direct cost, the lower will be the profit attributable to its shareholders.
The Cost of Goods helps determines the price for which the products need to be sold. Monthly analysis of Cost of Goods Sold will let you know the minimum price point and if your pricing needs revision.
Fill the information for each direct cost element in the section highlighted below:
To know about the Cost of Goods Sold in more detail, click here.
4) Operating Expenses
Operating Expenses are the costs associated with products or services that are not directly linked to the production of goods or the provision of services. They include administration and marketing overheads.
Some common examples are:
- Salaries and payroll costs,
- Electricity expenses,
- Gas costs,
- Water expenses,
- Office supplies,
- Advertising costs,
- Telecommunication costs,
- Travel costs, and
To analyze each expense item in detail, click here.
A business might have some other category of expenses than Operating Expenses. For that, we have some rows under the category “Other.” You can change the name to reflect your particular expenses. Other expenses may include utility costs, property taxes, legal expenses, bank charges, repair and maintenance, etc.
- Interest paid on long-term debt is not considered a part of Operating Expenses, as it is not a result of company operations.
- In the case of service organizations, all the costs (whether direct or indirect) are covered under the head Operating Expenses.
For a detailed explanation of additional categories of Operating Expenses, click here.
On filling out the Operating Expenses section, net profit/loss before depreciation, tax and interest (also referred to as Operating Income) will be calculated automatically both as an amount and as a percentage of revenue, as shown in the picture below.
Depreciation and amortization are non-cash expenditures in the profit and loss statement.
It refers to the amount of wear and tear on fixed assets over a period of time. The same is calculated based on a number of factors including the life of the asset, its nature, depreciation rate, and depreciation method.
6) Interest Cost
Interest expense is of a non-operating nature, and is incurred for borrowing long-term debt, bonds, loans or any other form of credit. You have to populate the template with the amount of accrued interest and not just the amount actually paid out.
The difference between the amount of interest accrued and paid is shown in the balance sheet under the heading “Current Liabilities.”
Profit after tax in amount and percentage will automatically be calculated after you input depreciation and interest in the template.
The amount of income tax you pay will depend on whether the underlying entity is an individual, a corporation, or something else. Tax rates will be separate for different types of persons.
Input the amount of tax in the appropriate row and the template will automatically perform the calculation for net profit or profit after tax.
Importance of Monthly Profit and Loss Statement
Monthly profit and loss statements measure the company’s financial condition and growth on a monthly basis. The importance of monitoring your business’s profit and loss statement are:
- When complete breakdown of monthly revenue and expenditure is available, you can make better financial decisions with respect to continuance or discontinuance of certain products or curtailing of any specific expenditure.
- It also serves as a record that can be shown to potential investors or partners who want to do business with your company. It is not only an important part of the accounting process but also assists in financial analysis.
- The statement helps in comparing the actual COGS with the budgeted COGS fixed within your organization or as per market standards.
- Profit and loss statements provide you with a basis to compare your performance with competitors. This can be executed through comparing various ratios, including profit margin, return on investments, etc.
- Banks and financial institutions look at monthly profit and loss statements to evaluate the credit worthiness of the borrower.
To read about additional benefits of preparing the profit and loss statement, click here.
Profit and loss projections can also be prepared using the growth history from previous months, as well as market conditions prevailing at the time of forecast. This can help a company with investor presentations, evaluating the health of the company relative to the market, and planning for the future.
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