Raise your hand if you like profits. I bet everyone has their hands up. But do you really understand what profit is, why you might have losses or how to read an income statement? I lot of contractors excel in their field: water well, geotech, geothermal, whatever. But knowing how to discern the health of your business — and making corrections as needed — is a different skill set. It’s one every business owner should have.
Last month in this space, I discussed the importance of a cash flow statement. This month, I’ll touch on the income statement (also known as a net income statement or profit and loss statement). Together with a balance sheet, the cash flow and income statements give a full picture of just how healthy — or unhealthy — your business is. This overview will explain what an income statement is and why it’s important. Sit down with your accountant to get a full, professional explanation of your income statement, what it shows for your business and how to chart a course toward profitability, if necessary.