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Managing small business profit and loss at your fingertipsProfit is usually the main element what shareholders want to attain in a business, therefore it is important to manage it. Of course, not forgetting another element that businesses usually dislike – loss. As a small business owner, you need to know how to strategically manage profit and loss. Why is that so? A “good” profit and loss is like the pillars of a house that gives it a strong foundation. Loss is probably ever a good indication for a business as it means failure of generating sufficient profit to cover expenses. That failure might saddle the business in debt. First, you need to develop a business strategy that will lead you and your business in a clear direction, thus generate profits. It could be “to become a market leader”, “to be a top innovator in the industry” or “to be the top in providing customer service”. With a clear direction and strategy, you then can strategise every single step into tactics as well as action plans. Next, track your business’s profit and loss. A P&L is a crucial indication of a business’s ability to survival in a financial downturn. Then, manage money effectively as it is a smart move as a buffer for any crisis. Effective management in money shows how a business saves money, grow on existing cash and avoid financial meltdown. Establish procedures to control customer receipts, petty cash and vendor payments. The last step is to integrate both monitoring P&L together with money management. By doing so, you can successfully handle income and save money on a long-term basis. Begin by starting a plan and set a date to fulfill the aim, as well as the resources needed. Then go through every single item on your P&L to determine what expense can you reduce or which item can increase income. Work out if you need to give discounts to increase your sales, launch new products/services or launch a marketing campaign according to your business strategy as well as goal to attain. Proper management of P&L is the way for small business owners to increase money, boost sales and outmatch the competition. |