What Is a Profit and Loss Statement and How to Outsource It

What Is a Profit and Loss Statement and How to Outsource It?

What Is a Profit and Loss Statement and How to Outsource It
Leading a successful business means that you know your way around the market and investments. Knowing how and when to sell your product can make a difference between successful and unsuccessful companies. But no matter how confident you are in the business model, you’ll still need some proof. 
Profit and loss statement provides insight into how much you gain and lose over your product or service. It is pivotal that you get it at some point and keep generating it every month or quarter. If not, you’re basically running a business on blind fate.

What Is Profit And Loss Statement Exactly?

If you’re new to entrepreneurship or have never worked in a company before, you’re probably wondering what is a profit and loss statement. It’s not a fancy term that refers to action completely illogical and opposite from what it sounds like. It is pretty self-explanatory. Profit and loss statement is a document that shows revenues, costs, and expenses during a specific period. In simple terms, it shows how much you’ve gained vs. how much you spent with your business model. 
The selling price of your product will always be affected by other expenses. You’ll need a myriad of services including advertisement and marketing, product placement, etc, to actually sell it. To keep track of these expenses as well as gain, you’ll need a profits and losses sheet. 
This statement includes:

  • The Income

This refers to the total amount you received from your rendered services or sold products. It does not include any expenses or depreciation of your product. So bear in mind that it’s not the final number that you’ll get from your products/services. 

  • Cost of Goods Sold 

This refers to the carrying value of the products sold over a specific period. Carrying value is the same as book value. It’s just a term used in accounting, so don’t get confused over it. 

  • Gross Profit

In short, it is the amount you’ll get minus the production and all associated expenses, as well as selling expenses. To get gross profit, you’ll have to deduct the cost of goods sold to profit or income. 

  • Expenses 

This relates to all the expenses combined that your company had, which are related to the process of selling the product or rendering services. 

  • Net Operating Income

This is the annual income you get, minus all the above-mentioned deductions and expenses. Everything from the cost of production, sales, as well as the depreciation cost and other similar expenses, is already included and subtracted in the net operating income. 

  • Net Income 

Before you get to the number of net income, you’ll have to add “other income” and “other expenses,” which include everything that you earned or spent extra on the process of advertising, selling, and production. 
What Is Profit And Loss Statement Exactly

Is Outsourcing Profit and Loss Statement Possible? 

Now that we know what this entire statement (as well as everything that’s included in the list) represents, it’s time to move onto another topic. If these numbers, calculations, and accounting, in general, confuse you, it’s best to leave it to your employers. But what if you don’t want to acquire a profit and loss statement from your accounting team? Is profit and loss statement outsourcing an option? 
The answer is – yes, it definitely is. More importantly, hiring a company to generate a monthly, quarterly, or annual profit and loss statement might be advisable if you’re running a large business. Because your accounting department has enough on their hands, they might provide stats inaccurately. Leaving this matter to someone outside your company allows you to get precise info on your profit and loss over a specific period. 
Another reason why you should turn to outsource when it comes to generating this type of statement is because of fraud. Almost every miscalculation can be justified as human error. We all make mistakes. But if the issue persists, and your expenses start to pile up, chances are someone is intentionally making a mistake.

How to Outsource the Profit and Loss Statement

When it comes to acquiring any services related to calculating your revenue and expenses, it’s best to stay safe. To do this, you should check the reputation of a company, their business history as well as their expertise. Because you’re trying to outsource profit and loss statement, it’s crucial that you pick the right partner. Here are a couple of steps to help you choose the right one. 

  • Create a Clear Workload

Before you can pick an outsourcing partner, you should first identify the services you need. To do this, you should write a clear scope of work. This way, you’ll identify your company’s needs, as well as means on how to solve your problem. Because you need a profit and loss statement, make sure to include the type of access they’ll have to your files, and list them by priority.

  • Expertise and Requirements

Expertise should be a top priority. So during your hiring process, make sure you emphasize the level of expertise you’re expecting from your future partnering company. This way, you’ll set things clear from the start, and there won’t be room for disappointment in the future. 
profit loss statement Expertise and Requirements

  • Their Reputation

How good a company is in providing specific services is closely related to its reputation on the market. Everyone can land a great business deal and finish it, leaving the employer satisfied. However, if providing impeccable services is something that a company does for a very long time, people will know its name. So if you’re looking for a great outsourcing partner, it would be wise to focus on their reputation more than anything else. 

  • The Budget 

When it comes to your budget and how much you intend to spend on acquiring the aforementioned services, you should be quite transparent. This will allow you to have clear communication and avoid any unnecessary misunderstandings. Furthermore, the company you’re trying to hire will put more or less effort into proving they’re the right choice, depending on your budget. So pick the right number for the volume of work that you require, and be clear to specify any bonuses or benefits related to partnering with you. 

  • Data and Intellectual Property Privacy 

Because you’ll be sharing sensitive information with your future partner, it’s recommended that both parties sign a nondisclosure agreement. So before sharing any data, be sure to protect it. The companies that you’re reaching out to should be of impeccable reputation, but you should never risk it with these things. A small mistake can prove to be quite costly for your business, as you aren’t aware of your competition’s goals as well as their means. 
Here, at Checkissuing, we have extensive experience in reliably sending payments and documents out, and outsourced check writing. If you think we can help you out, don’t hesitate to contact us today.