Check Your Company’s Financial Health: Part 2

The All Powerful Income Statement

Last week we dove into the Balance Sheet, which I am the first to admit is a bit of a snore (though very useful). This week we are going to take a look at arguably the most versatile financial report available (queue drum roll)…the Income Statement.

 

QB or Xero or whatever accounting software you are using is going to have a canned version of this report that focuses on your net income for the entire company. What is net income, you ask? Net Income is the profit you make from sales after paying all of your bills.

 

Looking at net income for the entire company has obvious uses and companies’ typically track this on a monthly basis as a pulse check for profitability.

Here is an example of a standard IS report from Xero:

Xero Income Statement

 

But what makes the Income Statement special is its ability to be applied to segments and even single products to measure profitability. Want to know whether your light bulb department makes more than the garden department? The Income Statement can do that. Want to know whether sales of that moon moon t-shirt justify the high printing costs? The Income Statement can do that.

 

With careful collection of revenue and expense data, you can create an income statement for any product or division of your company. I have even produced income statements for sales personnel that show the cash they bring in less their travel and salary expenses. Even a sales superstar can put you in the red if their compensation and expense budget is too high.

 

Here are a couple examples to give you some inspiration for your next Income Statement:

Income Statement by Sales Team

IS Example 1

Income Statement by Product

IS Example 2



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