A profit and loss statement is a very handy statement to look at for your business and seeing where your money within the business is going. It gives you a nice image of the net income of your business. It does this by calculating all the expenses that the business has incurred and subtracting this figure from the revenue that the business has brought in. By subtracting the expenses it gives you a clear indicator of the net income of the business.
With any accounting statement it does look a little confusing to start with. There are a lot of different headings and figures and it can be overwhelming. However once you understand the statement it will begin to look normal and easy to understand.
There are a few common terms that will show up on all profit and loss statements. Understanding these terms and knowing what each one means will help you to decipher the statement.
Revenue covers not only income from the products or services you provide but it covers ALL money that comes into the business. This can include the sale of equipment or property that is in the name of the business. It can also include any refunds that you receive for your tax returns.
The final expenditures line is the total amount that is paid out in expenditures throughout the period. However this is broken up into different sections so that you can properly understand where your expenses are going.
COG stands for cost of goods. This section is made up of the cost of the goods that you sell or provide. Selling something for X amount does not always mean that you make that amount. You need to factor in the costs in which are incurred to produce the product. These costs are allocated to the COG category.
The gross margin is the amount that you get when you subtract the cost of goods from the revenue that you receive for the product. This gives you the amount that you make as a profit on each product. It is good to try and have a set mark up amount on your products to ensure that your gross margin is suitable and sustainable for those products.
OPEX stands for operational expenditures. The operational expenditures for your business are all the other costs incurred by the business in the process of running the business and creating the products. These costs can include travel costs, equipment costs, wages, utilities, computer and software costs.
The list can become quite long depending on the nature of your business, however it is good to have each line separated so you can see exactly which of the operating costs are the highest and which ones you may be able to reduce in different ways.
Depreciation is the process in which different items reduce in their value. This covers a few different items including vehicles, technologic items such as computers and equipment. It is a good idea to track the depreciation of these items and then when they have lost their value it can be claimed at tax time.
EBT stands for Earnings Before Tax. The way in which this is calculated is by subtracting the COGs, OPEXs, interest and depreciation from your total revenue. Tracking the EBT is a great way to see the performance of the business.
Profit is classed as the bottom line of your business accounts. It shows the total amount of income that is in the business after all expenses have been subtracted from your revenue. The figure that shows is the amount of money that they business has actually made above what it has spent. Overall, seeing a profit is the goal for any business.
A simple way to think of the profit and loss statement is by thinking that it is a way to see your sales minus your expenses. Try to look at it as simply as possible and within no time you will be a whizz at the profit and loss statement.
How does it work?
Single touch payroll works by a report
being generated and sent to the ATO after each pay run is completed. You do not
need to change the way that you run your payroll and nothing about that process
will change. You will still need to send your employees their pay slips after
each payroll as normal. The only difference is that the ATO will also receive
the information as well.
Most accounting programs are now single
touch payroll compatible so you should not need to change your programing at
all. If you are not using an accounting program to run your payroll then you
should definitely look at the different options and choose which one will work
for you. Having an accounting program helps to make sure your figures are
accurate and you are providing your employees with the correct amounts of wages
For the accounting programs that are not
compatible there is the option for a third party sending service provider to be
integrated with your program and the reports then be sent through the third
party service. If you are unsure if your program is compatible, speak with your
accountant and they will be able to assist.
Because there is the integration of the
single touch payroll with your accounting program, there is not a cost for it.
The only costs that you would have are those that you are already paying for
your accounting program. There are many different programs and packages
available to suit different budgets and business needs. Your accountant can
help you to determine the best one for you.
Single Touch Payroll commenced in July 2018 for businesses that have over 20 employees which means if you have over this number of employees you should already be using the single touch payroll.
For businesses that have under 19 employees
it has now been passed that all businesses need to be beginning to use single
touch payroll by 1st July 2019. This will be a gradual change and
there is time to request an extension if you will not be ready by this point.
For businesses that have less than 4 employees and do not use an accounting
program, you will still need to use single touch payroll. There have been
programs created that are low cost and no cost which can be used to complete
It may seem like this is just another thing you have to do on a weekly basis, however it is a good thing! It will help to keep you up to date with the ATO and on track throughout the year. Speak with your accountant about how to make the change if you have not already done so. If you are a small business you do not need to wait until 1st July to begin using single touch payroll – you can start now.