It can be easy to get caught up in throwing money at this or that…
Having worked with a lot of massage therapists, I’m regularly asked to help dig into the numbers of these businesses. That means I need to get a good look at all the finances. So the very first thing I often ask for is the P&L or Profit & Loss Statements for their business. The unfortunate reality is that most of the businesses I consult with, they can’t produce that before our consultation. And this is not to shame anyone, by any means, I’m using this as a launching point to educate on this, because there is obviously a huge problem here. Because a Profit & Loss statement is, in my opinion, the most fundamental singular report or statement to knowing your finances. If you don’t have this readily available, or can’t get it fairly easily, there’s no way you really know your numbers. None. So if you’re somebody who either doesn’t know what the heck I’m even talking about, or does know but hasn’t ever really gotten this kind of thing together, we need to talk. Let’s dig in so you know what this is, why it’s so necessary, and how you can piece this together really easily.
It’s time to finally take control of your finances. Getting to know your numbers can come down to this singular report….a Profit & Loss statement. Let me preface this by giving the reminder that I am not a financial advisor or tax professional and what I’m saying here is not direct financial, legal, or tax advice. There…got that out of the way.
So first, what the heck is a Profit & Loss statement? Simply put, this is a financial statement that summarizes the money that came into your business and the money that went out of your business. So your revenue and your expenses. And I know some of y’all are like “oh my gosh, a financial statement” like it’s some big complicated book of numbers. I promise, it’s not. Most of the time, this is like a single piece of paper with a list of numbers on it. It’s super simple and straightforward; especially for small businesses. Yes, even if you have employees or renters.
Now, why is this statement so important and why do you need it? First, because it’s the summary of all your business finances. It gives a basic breakdown of where your money came from and where it went, but it’s not super complex. So, general rundown here, you’d have a line for your revenue. It may be a single line that shows your business brought in X number of dollars. That’s it. Or, if you have multiple streams of revenue, you may categorize them, so you can see what each one of them brought in. So say one line might be for the revenue generated by massage services, another for retail, and another for CE classes you taught. And then just a total of all those to see the full amount your business brought in. Next it’s a list of expenses. And these are typically going to be broken down into categories. So a line for how much you spent on each category of expense; rent, utilities, insurance, professional development and CE classes, professional dues, marketing, etc. And finally at the bottom of your P&L statement, you get your net income; that’s your revenue minus your expenses, so whatever is left over is your net, or what you actually made as income or profit.
And this brings me to the second big reason you need this…this is how your taxes are filled out. So when you or your accountant go to file your taxes, you have to list out how much you spent in each of these typical expense categories for things that are written off as business expenses, right? Well this P&L statement lists those all out, nice and neat for you so you already have the totals in front of you and you can just plug in those total numbers. I do my own taxes every year, and seriously, I print off my P&L statement, plug in the numbers, and bam. It’s done. For most of us, this P&L statement gives the perfect summation of your finances for that purpose, either monthly, quarterly, or yearly. If you take a big box of receipts and bank statements over to your accountant, I can almost guarantee they’ll put together a P&L statement so they can have all those numbers clearly listed out in front of them, and then plug those totals in to file your taxes.
Alright, now the real question I know a lot of y’all have: how the heck do you make one yourself? Here comes the part a lot of you keep putting off, but it really is the most critical. Track everything. Every cent that comes into your business needs to be tracked. And every cent you spend on your business needs to be tracked. Whether you do this in something like Quickbooks, a spreadsheet, or on pen and paper, that part doesn’t matter. Whether you automate a lot of those entries or not, doesn’t matter. The important part is that it’s tracked. Period. I’ve said it a thousand times and I’ll keep saying it, you’re a business…act like one. This is bare bones basic business. Track your money. The more you can do this as you go, the better. Because then at the end of the year or whatever period you need, it’s just printing out the statement and applying those numbers wherever they need to be applied. So whether you do bookkeeping entries daily or weekly, set time aside, no excuses, and stay on top of tracking this stuff. And if you’re overwhelmed with Quickbooks and the like, but you need something a little more robust and easier on you than pen and paper, I’ve got something to help you with that to make it simple.
I recently published an Excel spreadsheet that allows you to track stuff in a super simple format. You just enter each sale, enter each expense, and then it does all the calculations and stuff for you. You get to know all your financial figures, get a P&L statement worked up, and even your key performance indicators like profit and expense per session, rebooking rate, all of that stuff, without having to figure it all up yourself. And there’s some charts and graphs to help you see it actually laid out in a visual format instead of a bunch of numbers that make you glaze over and stare in overwhelm. You’ll find that RIGHT HERE so go check it out, pay once and you can use it year after year. It’s not a subscription type thing. It’s just a spreadsheet.