AmiSight 7/18: Looking at and Tracking Our Profit and Loss Statements Differently
Typically, the top of our profit and loss statements includes our variable expenses. These expenses include the cost of goods sold, commission, etc. These are expenses tied to the products and services we deliver and sell to our customers. Therefore, they will go up and down based on our sales.
The bottom of our profit and loss statements includes all of our "other expenses." These include items like our rent, marketing expenses, payroll, insurance, travel, etc. So if you think about the costs at the bottom of our P and L, they could be broken down into two different categories: the money we have to spend and the money we choose to pay to try new things, grow, and expand our businesses.
The money we have to spend is rent, insurance, utilities, salaries, etc.; these are basic expenses to keep our lights on and keep the business running on time. The money we don't need to spend, which I believe should now be tagged as investment expenses, are new items that we are testing or trying to use to grow and expand our businesses. These are investments we are making to get bigger, better, or different in the future.
What have you been investing in? These investments might include new salespeople, new products, or different marketing campaigns or channels. You may have even decided to open a new store or a new location. Whatever your investments might be, we need to track, monitor, and understand them.
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