What is a Profit and Loss Statement for self-employed business owners?
Thinking about walking your own path and becoming self-employed? Though it may seem like taking a leap into the unknown, getting your internal processes up and running early can make all the difference. This is why creating and managing an effective Profit and Loss (P&L) Account is so important. It is a tool that enables you to keep track of your income and expenses and informing you if you are generating a profit or not. Yet being self-employed, the type of Profit and Loss Account you’ll have to arrange will be different from that of an established company, so it’s vital that you understand what to do beforehand. So, what is a Profit and Loss Statement for self-employed business owners?
What is the point of a self-employed Profit and Loss Account?
Whether you’re thinking of going freelance or starting your own business, setting yourself up as self-employed means having 100% liability stake in your own success. As such, keeping track of your finances is not only vital for enabling you to pursue your goals, it’s also crucial for managing your long-term financial well-being, as well as highlighting the need for creating a self-employed Profit and Loss Account. The purpose of a self-employed Profit and Loss Account is to help you log and keep track of your income and expenses and, therefore, placing you in a stronger position to identify earlier on as to whether you’re making a profit or loss.
What does a self-employed Profit and Loss Account include?
A Profit and Loss Account is designed specifically for logging your income and expenses across a specific time range to show you whether you’ve generated a profit or if urgent changes are needed. Naturally, the level of detail required depends on the type of business you are running and the complexity of your operations, but what many self-employed business owners tend to do is to split their Profit and Loss Statements into different categories. The beauty of this is that it makes it clearer to understand how you’re generating an income and where money is being lost. As such, a Self-Employed Profit and Loss Account may include details like:
- Sales revenue
- Cost of sales
- Operating expenses
- Marketing/advertising costs
- Research and development costs
- Staff wages
- Administrative costs
- Any additional income.
What does a Self-Employed Profit and Loss Account template look like?
Designing a self-employed Profit and Loss Account for the first time can be daunting. After all, where do you begin? The important thing to remember is that, in spite of its importance, you can make it as simple or as complex as you need it to be. You can also change it at a later date too, should you decide to do so. However, the more detail you put into your Profit and Loss Statement, the easier it will be for you to follow and manage your finances effectively. But to give you a clearer understanding of what’s required, here’s a sample Profit and Loss Statement that a self-employed business owner may use:
|Return on Sales||%|
|Total Sales Revenue||£|
|Cost of Sales:|
|Total Cost of Sales||£|
| Operating Expenses:
|Total Marketing Expenses||£|
|General & Administrative|
|Maintenance & Repairs||£|
|Total General & Administrative||£|
|Total Operating Expenses||£|
|Income from Operations||£|
|Other Sources of Income||£|
Need help managing your finances?
If you’re considering registering as self-employed and pursuing your own success, making sure that you’re well prepared for the hurdles that lie ahead is vital. One way of shoring up your position and making sure that you’re in control is by creating a detailed Profit and Loss Account, logging all of the money entering and leaving your business. As such, this is a great way of assessing whether or not you’re in profit or if additional support is required to improve your financial standing - which is where Working Capital Finance could help. Providing access to a wide range of business finance solutions, Working Capital Finance gives you a variety of ways to support your bottom line, including Merchant Cash Advance, Invoice Finance, Overdraft Replacement, and Asset Refinance. All you need to do is source an agreement that’s most appropriate for you.
At Rangewell, we’re an Access to Finance specialist working with over 350 lenders to offer you a comprehensive overview of more than 23,000 business finance products. Our services are free to use for business owners and their advisors and we’ll also guide you through the application process. So if your Profit and Loss statements show that your business is loss-making and needs urgent support, apply for Working Capital Finance today or find out more with Rangewell