In our continuous journey to unravel the market trends and their implications on trade businesses,...
In the quieter shoulder months, our search for growth prompts a closer examination of our financials, bringing the Profit & Loss statement into sharp focus.
At ServicePro CFO we hear from owners that their Profit & Loss Statements (P&L) can often seem confounding:
- "It feels like a foreign language."
- "It's so complex; I get lost in the details."
- "How is this supposed to inform my business decisions?"
And they are not alone. The need for clarity is a common theme, and it begins with stripping back the complexity to reveal simple, actionable insights.
Gaining true financial insight requires an understanding of the foundational elements that impact your firm's cash flow and expenses. By logically grouping expenses into high level "buckets" and visually trending their progression over time, trends start to surface, directing our focus and informing our strategies.
The example above demonstrates such grouping, not specific to trades but illustrative nonetheless. It quickly highlights month-on-month expense trends and their correlation to total revenue. With this clearer view of your financial standing, you can pinpoint areas that warrant the most attention and develop prioritized strategies that align with your business objectives. This might include:
- Adjusting marketing efforts to areas with the highest ROI and increasing spend there.
- Streamlining overhead to enhance operational efficiency.
- Refining incentive programs to maximize productivity.
This exercise usually always leads to a broader discussion on benchmarking, as many seek a 'normal' or 'standard' in accounting as a measure of comparison. However, given each firm's unique approach to accounting, 'normal' is more myth than reality. For instance, whether comfort advisor salaries or commissions are included in direct labor can vary widely. Therefore, rather than fixating on a standard benchmark, we should focus on the direction of our trends and iterative improvement. The real value is in understanding these trends over time, not the absolute numbers themselves.
Your P&L should serve as a tool for guidance, not confusion. By deciphering the story your financials tell, we can lay the groundwork for informed, strategic decision-making and sustainable growth.
Stay tuned for our upcoming emails, where we will introduce two more strategic approaches to help bolster your business, especially during these shoulder months.
If you have any questions or concerns feel free to shoot me an email, visit our site @ www.ServiceProCFO.com, or schedule a call with us here
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ServicePro CFO offers Turnkey Accounting & Finance for Trade Firms using ServiceTitan. Our exclusive focus on ServiceTitan clients means we're deeply attuned to the nuances and intricacies of managing accounting services in the trade industry.
Tired of you P&L sounding like a foreign language? Click below to schedule your free consultation today.
