How to Read Company Financials Part One - Understanding Profit and Loss Statements with Stacey Bennett

How to Read Company Financials Part One - Understanding Profit and Loss Statements with Stacey Bennett

Connect with Stacey here:
https://www.linkedin.com/in/staceylynnbennett/
https://theslcgroup.co/

Watch the episode here:
https://youtu.be/D5yXR0skfR8

In a recent episode of the Metal Steel Manufacturing Podcast, host Greg Sheldon speaks with Stacey Bennett, an accountant, profit coach, and strategist, about understanding financial statements, specifically the profit and loss statement (P&L). 

The P&L tracks taxable income and deductible expenses, making it the financial statement business owners rely on to assess financial performance, determine tax liability, and make informed decisions.

Bennett emphasizes the importance of maximizing legally deductible expenses while maintaining financial health and operating on a sustainable budget. She recommends using the profit-first model to create and run profitable, resilient, fiscally healthy companies. This model differs from the traditional approach in the accounting industry, which aims to minimize taxes by maximizing expenses.

The P&L can be customized to provide different information, such as tracking different revenue streams to determine which are more or less profitable. It can also assess the return on investment (ROI) on advertising and compare current performance to previous periods or budgets.

To avoid costly mistakes, Bennett recommends maintaining consistency and clarity in accounting practices, mainly when categorizing expenses. She also advises against creating too many accounts in the chart of accounts, as it can make it difficult to calculate total deductions and create confusion during tax reporting.

Throughout the episode, Sheldon and Bennett also discuss the importance of seeking out accounting professionals willing to educate and coach their clients rather than just doing the bare minimum of preparing tax returns. As the accounting industry continues innovating with technology, accountants must look for new ways to deliver value to clients. This higher level of consulting, advising, and strategy is becoming more common, so business owners should seek accounting professionals willing to provide that service.

The episode concludes with a reminder that the P&L is a critical financial statement that helps business owners assess financial performance, determine tax liability, and make informed decisions. Business owners can run profitable, resilient, fiscally healthy companies by maximizing legally deductible expenses while maintaining financial health and operating on a sustainable budget. It is essential to consult with an accounting professional to avoid costly mistakes and ensure compliance with accounting rules and regulations.

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