Author: Stephen Huck

By: Jennifer Brazer

Jennifer is the author of From Cubicle to Cloud and Founder/CEO of Complete Controller, a pioneering financial services firm that helps entrepreneurs break free of traditional constraints and scale their businesses to new heights.

Fact Checked By: Brittany McMillen

Profit And Loss Statement Vs. Income Statement:
Know The Difference

Income statement and profit and loss statement are essentially the same financial document, though the income statement often includes more comprehensive details about a company’s financial performance over a specific period. Both documents show revenues, expenses, and the resulting net income or loss, helping business owners track financial health and make informed decisions. The income statement typically follows a more formal structure required for external reporting, while the P&L statement may be simplified for internal management use.

According to a 2023 survey by the National Small Business Association, 61% of small business owners struggle with understanding financial statements, leading to poor financial decisions that cost them an average of $29,000 annually. Over my 20 years as CEO of Complete Controller, I’ve worked with thousands of businesses across every industry imaginable, and I’ve seen firsthand how mastering these financial tools transforms struggling enterprises into thriving ones. This article breaks down the subtle yet important distinctions between these statements, shows you how to leverage each for maximum benefit, and provides practical templates you can implement immediately to gain crystal-clear financial visibility.

What is the difference between a P&L and an income statement?

• Both terms refer to the same financial document that tracks revenues, expenses, and net income over a specific period
• The income statement is the formal name used in accounting standards and external reporting
• P&L (profit and loss) statement is the colloquial term often used internally by business managers
• Income statements may include more detailed line items for regulatory compliance
• The structure and purpose remain identical—showing whether a business made or lost money

Understanding the Core Components of Financial Statements

Every income statement follows a fundamental structure that reveals your business’s financial story. Revenue sits at the top, representing all money earned from sales, services, and other income sources. This gross figure forms the foundation for understanding your business’s market performance and customer demand patterns.

Cost of Goods Sold (COGS) comes next, capturing direct costs tied to producing your products or delivering services. For manufacturers, this includes raw materials and direct labor. Service businesses track direct labor costs and materials used in service delivery. Subtracting COGS from revenue yields gross profit—your first key profitability metric.

Breaking down operating expenses

Operating expenses encompass all costs required to run your business beyond direct production. These include:

• Salaries and wages for administrative staff
• Rent and utilities for office or retail space
• Marketing and advertising expenditures
• Insurance premiums and professional fees
• Depreciation of equipment and assets

Each expense category tells a story about your business priorities and efficiency. Smart business owners analyze these ratios quarterly, comparing them against industry benchmarks to identify cost-saving opportunities.

Non-operating items matter too

The income statement captures financial activities beyond core operations. Interest income from investments, gains or losses from asset sales, and foreign exchange impacts all appear here. These items help stakeholders understand the complete financial picture, not just operational performance.

Tax provisions represent another critical component, showing both current tax obligations and deferred tax assets or liabilities. This comprehensive view distinguishes the formal income statement from simplified internal P&L reports that might exclude such details.

Real-World Applications for Business Success

Small businesses benefit from creating monthly P&L statements for internal tracking. This frequency allows rapid response to changing market conditions or unexpected expenses. One retail client discovered through monthly analysis that their Tuesday promotions actually decreased overall weekly revenue—customers simply shifted their purchasing patterns rather than buying more.

Mid-size companies often produce both detailed income statements for external stakeholders and streamlined P&L reports for department managers. This dual approach maintains compliance while providing actionable insights at the operational level. A manufacturing client increased profitability by 18% after implementing department-specific P&L tracking that revealed hidden inefficiencies in their packaging department.

Industry-specific considerations

Different industries emphasize various aspects of these financial statements:

• Retail businesses focus heavily on gross margin analysis, comparing COGS percentages across product lines
• Service companies track labor efficiency ratios, measuring revenue per employee
• Manufacturing firms analyze material cost variances and production efficiency metrics
• Technology companies monitor customer acquisition costs against lifetime value
• Healthcare providers balance service revenue with insurance reimbursement rates

Understanding your industry’s key performance indicators helps you customize financial statements for maximum insight.

Common Mistakes That Cost Money

Many business owners confuse cash flow with profitability shown on the income statement. A company can show strong profits while facing cash shortages due to slow-paying customers or inventory buildup. This disconnect causes 82% of business failures according to U.S. Bank studies.

Another frequent error involves misclassifying expenses between COGS and operating expenses. This mistake distorts gross profit margins, leading to poor pricing decisions. A restaurant client discovered they’d been including manager salaries in COGS, artificially lowering their gross margins by 8%. Correcting this classification revealed their true profitability and enabled strategic menu pricing adjustments.

The timing challenge

Accrual accounting requires recording revenue when earned, not when cash arrives. This principle creates timing differences that confuse many business owners reading their first income statements. December sales might appear as revenue even though payment arrives in January, creating profitable months with negative cash flow.

Small businesses sometimes mix cash and accrual methods inconsistently, producing meaningless financial statements. Choosing one method and applying it consistently ensures comparable results across periods.

Technology Tools That Simplify Financial Reporting

Modern accounting software automates income statement preparation, reducing errors and saving time. Cloud-based solutions offer real-time financial visibility, allowing business owners to monitor performance daily rather than waiting for month-end reports.

Key features to seek in financial reporting tools:

• Automatic transaction categorization using AI
• Customizable report templates matching your industry
• Integration with bank accounts and credit cards
• Multi-user access with role-based permissions
• Comparative analysis showing period-over-period changes

Building custom dashboards

Visual dashboards transform raw financial data into actionable insights. Effective dashboards highlight:

1. Revenue trends with seasonal adjustments
2. Expense ratios compared to budgets
3. Gross and net profit margins over time
4. Key performance indicators specific to your business
5. Alert notifications for unusual transactions

One client reduced their monthly financial review time from eight hours to thirty minutes after implementing automated dashboards that highlighted variances requiring attention.

Strategic Planning Using Financial Statements

Income statements provide the foundation for data-driven business decisions. Analyzing historical trends reveals patterns that inform future strategies. Seasonal businesses use multi-year comparisons to predict cash needs and staffing requirements.

Scenario planning becomes possible with accurate financial data. Business owners can model the impact of:

• Launching new product lines
• Expanding to additional locations
• Investing in equipment or technology
• Adjusting pricing strategies
• Changing supplier relationships

Each scenario’s projected impact on revenue, expenses, and profitability guides strategic choices.

Benchmarking against competitors

Industry associations often publish financial benchmarks showing typical income statement ratios. Comparing your metrics against these standards identifies strengths and improvement opportunities. A professional services firm discovered their overhead expenses exceeded industry norms by 15%, prompting a successful cost reduction initiative.

Banks and investors also use these benchmarks when evaluating loan applications or investment opportunities. Understanding how your financial statements compare to industry standards improves your negotiating position.

Creating Actionable Financial Reports

Transform basic income statements into management tools by adding analytical elements:

• Variance Analysis: Compare actual results to budgets or prior periods, calculating both dollar and percentage differences. Focus attention on variances exceeding predetermined thresholds.
• Trend Indicators: Include sparklines or mini-charts showing 12-month trends for key metrics. Visual elements communicate patterns faster than numbers alone.
• Narrative Sections: Add brief explanations for significant changes or unusual items. Context prevents misinterpretation and documents institutional knowledge.
• Action Items: Conclude reports with specific recommendations based on the financial analysis. This bridges the gap between reporting and decision-making.

Final Thoughts

Understanding the relationship between income statements and P&L statements empowers better business decisions. While the terms are interchangeable, the underlying financial intelligence they provide transforms business operations. Regular analysis of these statements reveals opportunities, prevents problems, and guides strategic growth.

Success comes from consistent application of financial insights to daily operations. Start with monthly reviews, build comparative analyses, and use the data to drive continuous improvement. Your financial statements tell your business story—make sure you’re reading every chapter.

Ready to maximize your financial reporting and gain deeper business insights? The experts at Complete Controller can help you implement professional-grade financial systems that drive growth and profitability. Contact us today to transform your financial management approach.

FAQ

What is the difference between a P&L and income statement?

Both terms describe the same financial report showing revenues, expenses, and net income over a specific period. The income statement is the formal accounting term, while P&L (profit and loss) is commonly used in everyday business discussions.

How often should I prepare an income statement?

Most businesses benefit from monthly income statements for internal management, with quarterly statements for external reporting. Public companies must prepare quarterly and annual statements, while small businesses should create them at least monthly for timely decision-making.

What are the main components of an income statement?

The primary components include revenue (sales), cost of goods sold (COGS), gross profit, operating expenses (like rent and salaries), operating income, non-operating items (interest and taxes), and net income.

Can I create an income statement myself?

Yes, using accounting software or spreadsheet templates. Start by listing all revenue sources, subtract direct costs (COGS), then subtract operating expenses. Include non-operating items like interest and taxes to calculate net income.

How do I analyze an income statement effectively?

Focus on trends over time, calculate key ratios (gross margin, operating margin, net margin), compare results to budgets and industry benchmarks, and investigate significant variances. Look for patterns that indicate operational improvements or concerns.

Sources

• Accountingcoach.com. “Income Statement Explanation.” www.accountingcoach.com/income-statement/explanation
• Finli Learn. “Income Statement vs Profit And Loss.” 15 Nov. 2024. www.finli.com/learn
• Investopedia. “Income Statement Definition.” www.investopedia.com/terms/i/incomestatement.asp
• Patriot Software Blog. “Income Statement vs. P&L: What Is the Difference?” 26 Oct. 2022. www.patriotsoftware.com/blog
• SEC.gov. “Financial Statement Overview.” U.S. Securities and Exchange Commission. www.sec.gov/fast-answers/answersfsfinstmthtm.html
• Taxfyle Blog. “Analyzing Profit and Loss Statements vs. Income Statements.” 22 Feb. 2024. www.taxfyle.com/blog
• Tipalti. “Income Statement Definition, Formula & Importance.” 2023. www.tipalti.com
• Zeni AI Blog. “Income Statement vs. Profit and Loss: Are They the Same?” 2023. www.zeni.ai/blog

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Everybody has to use credit, whether buying a car, buying or renting a home, or sometimes even applying for jobs. The fact is using credit is almost unavoidable. You will need a good credit score to have power as a borrower and lower interest rates.

You Get Credit for All Your Credit, Good or Bad

We have established that inevitably, you will have to borrow money for high-cost items you need in your life, but why spend more than you have to on a high-interest loan? The first thing a lender will look at is your credit score. Your credit score is determined by all data of your past credit reporting arrangements sent in by creditors, such as credit card companies or lenders. This score will ultimately decide the outcome of your loan. Let’s discuss what a good and bad credit score looks like and the importance of making good decisions with your credit. Then, we will examine what actions affect your score and how the data is collected. When we are finished, you will have a new appreciation for what your credit score can do to help you.

A Good Credit Score’s Value is in Your Interest

A good credit score will make or break a deal, but what is a good credit score? What is a bad one? To answer this, we have to look at your past credit behaviors from all the credit reporting agencies you have dealt with in the past. These behaviors, good or bad, are reported to credit bureaus, who then compile the information, assess it, and rank you on a scale from 330-830. A good credit score is somewhere above 700. A score on the higher end of the scale will show a lender you are reliable with money. Some actions that keep your score above 700 are:

• You are paying your credit card bill in full or on time. Late payments are the most common mistake people make. If you don’t have the money, don’t spend it!
• You are paying back all of your loans on time. The people who lend you money will also report nonpayment or late payment to the credit bureau. Be sure you can maintain these payments for the entire loan length before making the deal.
• You are paying your rent on time. If you rent your home, your landlord also has the right to report you to the credit bureau. If you don’t pay your rent or send it in late, you are subject to a drop in your credit any time you are on a lease.

Take Control of Your Credit

Your actions will cause your credit score to move on the scale. Paying close attention will help you to stay in control of it. Some activities affecting your credit score include paying your bills, rent, and loans on time. This represents the most common credit-affecting areas, but others exist, such as:

• You are opening many accounts in a short time.  When you apply for a credit card, you ask someone to inquire about your credit history. Unfortunately, credit queries affect about 10% of your credit score.
• You are closing many accounts in a short time, especially if the cards still have balance. This is a red flag to the credit bureau.  When you close tabs with a balance, you are showing them that you cannot afford to fulfill your agreement.
• They are defaulting on a loan.  Not being able to finish a loan contract is a big problem.  You should consider this before accepting a deal.
• Check your credit score often.  If you don’t know your credit score, many services can show you what it offers, and many are free! Know your score.  Knowledge is the power to stay debt-free and credit-positive. Check your score at least once a year.

A good credit score will be valuable to you throughout your adult life.  Use these tips and pay close attention to your credit behaviors. Every credit decision you make, whether good or bad, will follow you for years to come.  So, assess your choices thoughtfully to stay out of trouble!  Click here to see how you can begin building your credit today. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Young adults find out fast that they need credit to do anything in the adult world. Credit is easy to build once you know where to start. But no one gave a class on that in school, did they? Here is some advice to get you started.

It All Starts With a Piece of Plastic

We all grow up and envision what we expect our lives to be like. We imagine the perfect job, home, car. You may want to be an accountant with a three-bedroom home in California with a reliable vehicle. All before you turn thirty. Most of the time, you don’t have the money to accomplish these goals outright, even with a secure job. This is why you will need a good credit score that shows people you know how to spend your money so that they can trust you with some of theirs. You need good credit for everything, but you need a credit history. The best way to start is with a credit card! Get a secured credit card. You can go to any bank and apply. This card is more accessible because you will put some of your money down to get started. The money you put down will become your credit limit. All you have to do now is use it, pay for goods and services that you would use your debit card for, and stay under that deposit.

Plastic, Maybe, But Not a Toy!

You need to start building your credit because you will use your credit score for the rest of your life. Landlords will check it, banks that lend you money will want to know it, and sometimes even your employers. Be careful with that little piece of plastic because it can hurt you as fast as it starts to help. You can ruin your credit, but all that can be avoided. Avoid spending more than you have, don’t apply for more credit cards, and always pay your bill on time. Your score will flourish; remember, all those dreams depend on it.

Never Use Your Credit Card for Things You Can’t Afford

It can be tempting to want to spend it like free money, but you have to pay it back at the end of the month. Try to use it for bills that you already pay every month and save the shopping spree for your savings. This way, you always know what to expect when you get your bill. It will be consistent and easy to keep track of.

Avoid applying for other credit cards, even if they save you 10% when you check out at a department store. It can negatively affect your credit score. This is not a time to be impulsive. Instead, try to get a card with good benefits and use the one. If you want to open another account to separate your finances, go ahead as long as you use both and pay them off on time.

No matter what you use your card for, how much you are spending, or where you got it, the most important thing to remember is to pay your bill on time. This is why you should finish what you can afford because, at the end of each month, you get a statement from someone expecting their money back. If you don’t pay them, you will tarnish the reputation you worked so hard to build.

What is My Credit Score?

Your credit score is between 300 and 830, which helps a lender decide whether to lend you money or sell/rent something, like a car or house. The higher your number, the better your score. A good score might be 730. This would show a lender that you pay your bills on time, would be a reliable person to lend money to, and would probably qualify you for a lower interest rate. A bad credit score might be in the 550 range. This would be a red flag to any lender; you probably don’t pay your bills on time, pay your credit cards off with other credit cards, and have outstanding balances. This would make someone hesitant to lend you the money you need because you have not paid back the borrowed money. If someone did lend you money, they would give you a high-interest rate, making what you are buying more expensive.

You can check your credit score online or using a free app. Check it regularly and get a summary of the activity that may be making it drop so you can adjust your spending behaviors. Get a secured credit card, pay your bills on time, and know your credit score, and you will be in a great position whenever you decide you want to make your next life decision.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

It’s great that you’re taking meaningful steps towards achieving financial stability! One of the most important things you can do to reach your financial goals is to prioritize saving in your budget. By doing so, you’ll build a safety net for unexpected expenses and create a cushion for your future financial security. Your dedication to this goal is commendable and will pay off in the long run. Keep up the great work!

Why You Need to Budget for Some Savings

When you’re making a budget, remember that life is full of surprises. Like Forrest Gump said, “Life is like a box of chocolates. You never know what you’re going to get.” Hopefully, you can presume what expenses you will have, and your budget will cover all those expenses. If so, that’s great! Remember, though, that life is unexpected, which means spending deviates a little from our plan. This is why we need to account for those deviations. It might not seem as important when you have an unexpected birthday dinner for a close friend, but what about when that deviation is significant? Let’s say your son comes home with a permission slip for a school trip, one week in El Salvador with his favorite teacher, and all his friends are going. You need to write a check for $600, and he can have a trip of a lifetime, or a pebble hits your windshield, and your insurance deductible is $500, now that $300 windshield comes out of your wallet. Good or bad, life happens, so we need to set up a savings account and budget for it every paycheck.

How I Save Because I Am No Fortune Teller

Some people try to put a specific dollar amount away every month. For some whose income varies, putting away a percentage of their income might be easier. Some people put away 20 percent, others put away 30 percent, whatever you can manage. Now, where to put your savings? If you don’t already have one, open a savings account. This is a good placeholder for your money. This way, you can separate it from the money that you have budgeted to spend. Your savings account is a good place to save for future goals and unexpected expenses, vacations, shopping sprees, putting a down payment on a home, or that windshield. Always keep some of your money in a savings account so that money is immediately available if you need it.

You can invest some of this money, start a retirement fund, or invest in the stock market. Find one that looks desirable to you and start saving for your future because getting old is a great example of life happening. Some retirement accounts to look into are an IRA, Roth IRA, or a pension through your company.

Put a little money into the stock market. This can be a fun way to invest your money. Pick something you trust, a company you use, and believe will keep flourishing and making money. You don’t have to put the whole 30% there, but take 30% of your savings and invest it. The best part about this is you can turn that money into more money. Who doesn’t like the sound of that? Watching the money you invest grow is super fun. If you are losing money, you can always move that money around and never lose more than you put in.

Savings in your budget are necessary because no one knows what the future may hold. If you are not already saving or you read this, and you might not be saving enough, sit down to do some money management, and next time you get a paycheck, put something away for the unexpected. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

First-time users of QuickBooks may find the decision between QuickBooks Pro vs. Premier difficult. In this article, we will outline the prices and features of each to help your business make the best decision.

QuickBooks is accounting software used by business owners and accountants. Intuit offers two types of accounting software: online and desktop. In this article, we will be talking about the differences between the two desktop software, Pro vs. Premier. To learn about the differences between desktop software vs. online software, click here.

QuickBooks Pro

Price

$219.95 onetime purchase. It’s important to know that both software only have a shelf life of about three years.

Features

Below is a list of QuickBooks Pro’s most important features:

• Hosts up to 3 users, in addition to an external accountant, which is free.

It is only necessary if you need multiple users on a file simultaneously.

It can have 1 “external” accountant user for free in addition to the three users.

Audit trail tracks are used from separate users so the company can see which users made edits or inputs.

• Print checks. (Checks can be ordered through QuickBooks or 3rd party vendors; they do not come with software.)

If you use your bank’s online bill pay capability, you may not need to order printable checks- it can save your company a lot of money.

• Pay bills.

If you connect your financial institution with QuickBooks, you can often use this bill pay feature to send the command to your bank to process a bill payment to your vendor- completely paperless.

• Manage expenses.

Enter the bills you need to pay as they come and wait to pay them when cash flow allows. This is called accrual basis accounting. This is a great way to manage your payables.

• Track sales, customer payments, credit cards, and sales taxes.

This is a really important feature if you don’t get paid right away or if you have to track sales tax on sellable items. Warning! Be careful setting this up.  If it isn’t done correctly, it can be very problematic and difficult to fix. This is where you might want to consult a professional.

• Manage payroll, payroll taxes, and direct deposits. (Advanced payroll add-ons can be purchased through QuickBooks.)

Managing payroll in QuickBooks is a great way to keep everything in one place and allows you to charge hours to different jobs or different tasks and see the different results on your P&L statement.  This is another feature that, if not set up correctly, can cause problems and be difficult to fix.

• Set reminders and create to-do lists.
• Imports data from Excel and Imports data from previous versions of QuickBooks. (Remember, about every three years you will have to replace your software.)

3rd party applications are available to help format the Excel data for easier transfer. Improper import can mean hours of hitting the delete button. (Make sure you have a backup.)

• According to your bank, it can download bank and credit card transactions.

Works excellently with major banks but can cost you and your bank money. Smaller institutions, such as credit unions, will often not collaborate with this feature.  

• Offers multiple currencies.
• Create a budget. (only one budget per business year)
• Let you customize your invoices and other forms.
• Basic inventory tracking. (Read below for additional inventory tracking on Premier.)

Emphasis on basic. If you are planning to integrate a 3rd party inventory system or you have more than 10 SKUs, you might consider Premier.

QuickBooks Premier

Price

$379.95 onetime purchase

Features

QuickBooks Premier offers all of the features available on Pro. In addition to these features, QuickBooks Premier offers:

• Host up to 5 users.
• Create inventory assemblies and bills of material.

This feature also needs to be set up carefully and properly. As for other features, we recommend a professional set this up for your company.

For this feature, your company needs a system & staff internally that maintain and utilize these features.

• Create a business plan. (Basic)
• Forecast sales and expenses.

Based on vendor bills and customer invoices that you have put in the system. If you are not using AR or AP properly or you are not entering these things in a timely matter, this feature is useless.

• Allows you to create industry-specific reports.
• Price levels per item.
• Billing rate levels.

Great for law firms and consulting firms that may charge different rates for different people performing various tasks.

• Additional Job costing, reporting functionality, and capabilities.
• Filter sales orders according to current availability.
• Backorder viewing. (Inventory function)
• Closing date exception report.
• Availability tracking. (Inventory function)
• Previous reconciliation reporting.

This is perhaps the most important feature that Pro does not offer.

• Reverse journal entry.
• Creates purchase orders from estimates.

It can save tons of time and prevent inaccuracies. If your company uses POs, then this is a great reason to buy Premier over Pro.  

Premier offers quite a few more features than Pro. It is a no-brainer that accountants and bookkeepers prefer Premier over Pro. As reviews suggest, Premier is the better option for companies dealing with large amounts of inventory. On the other hand, if your small business offers a service as opposed to products, Premier would be overkill, and Pro should be your option. It is also important to note that QuickBooks offers a variety of add-ons as well as ‘extra’ license agreements to improve your QuickBooks experience. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Deciding between QuickBooks Online vs. Desktop can be confusing and time-consuming. In this article, we will compare features, reviews, and pricing in detail.

Ever since QuickBooks launched its new Online version (QBO), business owners have been contemplating making the switch. New business owners who have never used either software may be looking into which software may be best for their company. QuickBooks Online vs. Desktop?  The details can seem confusing for those who are not trained in the art of accountant lingo. Have no fear because, in this article, we break down the key differences and similarities, the future of QuickBooks, and prices for both.

Mobility vs. Stability

Intuit is actively encouraging its QuickBooks Desktop (QBD) customers and future customers to start using their newest cloud-based software. Entering Intuit’s QuickBooks Desktop vs. Online page, where both products are offered, it would seem like a no-brainer that QBO is the better choice. But this switch may seem unnecessary. To begin, let’s look at the key difference between the two: mobility. The main difference between cloud-based software vs. desktop software is the ability to access your accounting software on the go. For larger companies who need the extra features offered on QBD (feats. discussed later in the article) while also needing to be able to access your account on the go, companies offer cloud hosting for QBD at an extra cost.

QuickBooks and Your Computer

Still haven’t decided whether QBO or QBD is for you? Let’s talk about your computer. It’s easy to forget that one of the key factors in this decision is the device that will be running your software. Because QBD is software downloaded onto your computer, the internet is not required, and vice-versa for QBO. Because QBD is downloaded onto your computer and does not require internet access, it uses less processing power/memory to operate the program and perform tasks. You will have to download the program thus use computer storage, but the rest is up to the program. When you are operating such a large task online, your computer will need more short-term processing power to complete tasks. Therefore, the answer may lie in your computer and how new/old it may be or how willing you are to buy a new computer so you can run QuickBooks Online.

Features

As far as features go, QBO has more mobility features as well as instant access for accountants, phone support, and up-to-date upgrades without the extra charges. QBD ranks higher for accountants and bookkeepers because it has more time-saving features.  With that said, business owners prefer the easy to use cloud-based software over the desktop software because of its straightforwardness and lack of accountant jargon. A key deciding factor for you or your company may depend on how large your company is, the products or services you offer, and the number of accountants you will be sharing QuickBooks with. For small businesses, who don’t use accountants or use one accountant, QBO may sound more appealing.

Conclusion

Ultimately, the choice between QuickBooks Online and QuickBooks Desktop comes down to the specific needs of the business. If mobility and accessibility are a priority, QuickBooks Online may be the better choice. However, if advanced features and customization options are needed, QuickBooks Desktop may be the way to go.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Cash Flow management is one of the main challenges for small businesses. Proper budgeting skills can forecast cash flow 15-30 days out. In this article, we will discuss what cash flow is, common problems, and solutions to understand better and manage cash flow.

Cash Flow is the flow of usable cash for purchases/business operations. The management of money coming in and money going out. Every business is going to have a product or service to sell and generate cash. Retrospectively, every business will have some costs to produce the product or service they sell. As simple as it may sound, often, companies find themselves unable to make payments or accounts payable because they do not have the cash to pay it right now. This article will discuss the main areas that commonly affect Cash Flow (CF) and solutions to these problems.

Accounts Receivable

Problem

Accounts receivable are the money people owe you for purchasing your product or service. If you’ve ever heard the term “cash is king,” you may understand it from a business perspective. The quicker you get paid for your product or service, the better. Often, companies give their clients or customers invoices with a set period to pay for their product/service, or they extend credit. For instance, say you own a Lawn Care company, and you’ve completed your first lawn and invoiced the clients a bill for $100 due within the next 15 days. You were hoping they would pay you in 5 days because that’s when your bill is due for the loan you took out to buy all your lawnmowers. The client forgets to pay you until the 16th day (after a friendly reminder that their bill is due), but you are now scrambling to pay your lawnmower loan. This may sound like a silly mistake, but, in reality, it happens more than you’d think.

Solution

So, what can you do to prevent your new lawn mowing company from going under? Here are a few suggestions taken from the Pros:

• Negotiate the terms of your contract with clients
  • Pay up-front or directly after service is performed.
  • Decrease the amount of time the bill is due.
  • Late fees (last resort.)
• Set up monthly direct deposit to accounts receivable

Most recurring home service companies go this route. Before lawn service, have your clients sign up for a monthly subscription. That way, you know exactly how much you are getting paid, from whom, and when.

• Increase prices

If you find that you are still scrambling with your cash flow management, it may indicate that you need to increase the price of your lawn service to make up for the lost cost.

Inventory

Problem

Inventory is another excellent example of how businesses are in a cash flow management scramble. For this problem-example, we’ll use a widget manufacturer to explain. Let’s say you opened a small business making and selling widgets to retailers. You found a retailer who loves your widget and wants to buy 1,000 of them from you to sell at their store. O.K. great! You’ve done the math, and it costs you $2.00 to make each widget, and you sell it to the retailer at a wholesale price of $4.00, and they sell it for a retail price of $8.00 a widget. But wait, if you make 2,000 widgets, the price goes down to $1.75 per widget. You figure this is the better deal. Now you have 2,000 widgets, and you’re out $3,500 when you were initially supposed to have 1,000 widgets and be down $2,000. Bills start rolling in, and you’ve sold 200 widgets, and 30 of them had to be returned because of malfunctions. You now have more widgets than you can sell and are scrambling to pay your bills.

Solution

• Slow Down

Although the bulk option may seem more appealing because the price per widget cost goes down, you still don’t know how your widgets will do on the market. Take it slow, and don’t create more inventory than you can sell immediately. These costs add up and can come back to bite you.

• Plan for damages/malfunctions

It would be best never to assume that every widget that sells at the retailer will function correctly (as much as you’d like to think your widget is the best); technology does fail. You must budget for these returns in advance, even if that means accounting for more malfunctions than actuality in the beginning. Better safe than sorry. By the time you’re up and running the largest widget factory in the world, this type of forecasting will become easier.

• Know your retailer’s terms
  • Where the items are being displayed in the store.
  • How quickly do they pay you when you invoice them for your widgets?
  • What do they charge for damages/malfunctions?

Accounts Payable

Problem

Sometimes, events happen in life that cause an unforeseeable decrease in sales, and you are short of paying your vendors. For this example, we’ll use a restaurant. Let’s say you’ve been in business for years, sales have been good, and you’ve always paid your vendors on time. There’s a storm that lasts for about a week, severely hurting your restaurant’s sales and causing you to scramble to pay your meat and vegetable vendors. Typically, you pay them when they deliver the food to your doorstep, but today, when they come, you are short the cash to pay them.

Solution

• Negotiate with your vendors

Vendors typically will negotiate terms of payment, whereas banks do not. Instead of whipping out your rainy day (literally) credit card with outrageous interest rates, talk to your vendor first. See if you can negotiate the terms of your payment. Chances are, if you’ve been a loyal customer for several years and have always made timely payments, your vendor will let you extend your payment period.

• Make sure you have enough equity to cover your costs.

This would be the “rainy day” example. Life happens, and sometimes businesses take a hit. Although you can’t prepare for when your business will take a hit, you can be prepared for when it happens.

Budget

The goal for any profitable business is to have more money coming in than coming out. You always want to make sure you’re making more than you spend. This is what a well-maintained budget is for. You can forecast cash flow out 15-30 days in advance by maintaining accurate bookkeeping. But, when life happens, and you temporarily spend more than you are making, ensure the cash deficiency is covered by equity or available debt. Before you run to your credit cards, ensure that the debt + interest < the return on the investment. In conclusion, understanding your budget is always the best defense.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Often, small business owners have faced the question, “When should I hire an accountant?” at some point or another during their careers. It’s a tough question, and the idea of spending extra money on something you’ve been doing yourself in the past can seem daunting. If your small or new business has been faced with this question, it’s time to look at some factors. In this article, we are going to talk about situations that may call for an accountant, what they do, and what that means for your business in the future.

What Do Accountants Do?

Before we get into the nitty-gritty of whether your company needs an accountant, we should first start by clarifying what business accountants do. To begin with, not all accountants or bookkeepers are full-time. Often small businesses do one-time hires, quarterly hires, and so on. With that said, here are the five fundamental tasks business accountants perform:

• Setting up systems

As we stated before, not all accountants are full time hires. Some small businesses choose to hire an accountant at the beginning to help them “set up shop.” There is accounting software like QuickBooks that allows the average business owner to complete daily tasks; however, proper set up is key.

• Entering data (maintenance)

As businesses grow, so do their numbers. Entering data precisely and without error is key to a functional business. These tasks can be time-consuming and require additional help.

• Reporting Results and Forecasting

This task is crucial to business owners, small and large. Accountants can look at real-time facts and numbers, create reports on profits, or loss of profits, which can otherwise be confusing to non-trained business owners. Most of the accounting software available for purchase offers forecasting options, but they are basic. A real-life accountant can produce more detailed forecasting.

Another aspect of this is by creating Financial Statements. Eventually, your business may need to apply for a loan or a credit card. Banks and other institutions are going to ask for 3 Purpose Statements (P&L, Balance Sheet, and Cash-Flow Statement). These need to be precise and detailed the first time.

• Taxes

This is self-explanatory. The bigger your business grows, the more complicated your taxes get. Accountants not only do your taxes, but they also help get you the credits and deductions you otherwise would have missed.

Signs it May be Time to Hire an Accountant

Your business is growing

Business is doing great, and you’re ready to expand. Perhaps that means hiring more employees, more vendors, buying property, or even expanding. These are all wonderful but can cause some serious complications if you’re not prepared for them. When it comes to rapid growth, paperwork can become longer and harder to deal with. This is where an accountant can help take the reins and straighten out all legal, business, and tax paperwork that your growing business may accumulate. As far as expansion, when it comes to buying/selling property, an accountant can help you through the process and create a plan that will work best for your company. They also can help you avoid fees or unnecessary taxes.

Applying for loans

Like most businesses, you’ll have to apply for a loan or a business credit card. In some cases, you’ll be working with Investors. Investors, loan officers, and banks are going to want detailed and exact financial statements. Accountants can take the pressure off of producing such documents that become more complicated and detailed as your business grows.

You have a hard time with taxes

It’s no secret that the U.S. tax code is detailed and confusing and is always changing. Accountants stay up to date on all occurring changes the U.S. Tax Code may be implementing and can assure that your company complies with all new codes and structures. This way, your company is safe from any unnecessary audits, fees, or penalties. They help you do your taxes right, but they can also assure you that your company gets the right tax credits and deductions to keep costs low. *Note* If you are facing an audit and are unsure what to do, we highly recommend bringing in an accountant, no matter what the case may be.

Accounting and bookkeeping tasks are keeping you away from other priorities

Let’s say you’re good at accounting and have managed to keep yourself afloat without one for several quarters accurately, but your business could use a little “sprucing up.” Accounting and bookkeeping tasks are long and time-consuming. If you find that these tasks, as a business owner, are keeping you away from reaching your full potential, it may be time to bring somebody in so you can focus on more business development to help your company grow. About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

Bookkeeping and Accounting are commonly mistaken for one another. Although similar in nature, some key differences set them apart. Here, we will discuss the different tasks between Bookkeepers and Accountants.

The role of Bookkeeping and Accounting is commonly misunderstood. They both share a common goal: finance. Their tasks may overlap in some areas (depending on your company or financial software.) The key difference is that a Bookkeeper’s role is to keep financial transactions and Accountants analyze the data input by bookkeepers to help business owners in forecasting and giving financial advice. This is a general and simple definition. In this article, we will discuss the key differences between Bookkeeping and Accounting in greater detail.

Bookkeeping

Generally speaking, a Bookkeeper makes far less income than an Accountant. Bookkeepers need less education (an associate’s degree is required) and usually cap out at about $20,000-$30,000/year. This is not to downplay the role of a Bookkeeper by any means. This is to give business owners an idea of what to expect. As stated before, a bookkeeper’s key role is to keep and record financial transactions. Here is a general list of Bookkeeping tasks:

• Recording and maintaining financial transactions. Such as processing invoices, recording receipts, payments, and other transactions. This is commonly known as the General Ledger.
• Maintaining the payroll system.
• Preparing financial statements (getting it ready for the Accountant).
• Managing accounts receivable and accounts payable (who owes you and what you owe).
• Creating and Maintaining Financial Systems.

*Note- this is one of those tasks that can be either/or. Nowadays, there is fantastic software such as QuickBooks that serves as a home for all your financial recordings. However, if these systems are not set up, this can cause severe problems down the road. This is one of those cases where you will want to have someone with extensive knowledge of the program and have set them up before.

Accounting

As stated before, an Accountant’s general role is to analyze financial data, past and present, and aid business owners in financial decision-making. The Bookkeeper’s role is to keep that data. An Accountant’s qualifications need at least a bachelor’s degree, and salaries generally start at $60,000/year. Notice that I said ‘start’ rather than ‘cap’ like I did Bookkeepers. This is because Accountants qualify for an array of certifications that can boost that number, such as a CPA certification. Here is a list of general Accounting tasks:

• Analyzes financial data and creates a business plan based on that data.
• Taxes
• Accountants are trained on the U.S. Tax Code. They can not only do your taxes but also make sure you get all of the deductions and rebates your company qualifies to keep costs low.
• Corporate reporting and compliance.
• Financial management advice.
• Finalizes and edits financial statements. (Balance Sheet, P&L Statement, Cash Flow)

As you can see, the Accountant and Bookkeeper have different roles. However, both are important when it comes to running your business smoothly and efficiently. If you’re looking into hiring a Bookkeeper or Accountant, one of the best ways is through word of mouth. If you are a new business owner, we recommend moving quickly because both professions are in high demand.

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.

An alarming two-thirds of Americans do not have a budget in place.  Unfortunately, managing money is not something that most learn while growing up.  Maintaining a home budget can reduce stress and allow you to live within your means.  Start today by reading how to create a budget.

What is a Budget, and Why is it so Important?

Let’s all agree being an adult is hard.  Can I get an amen?  Life can get overwhelming, and we can become consumed by how much we have to do on a day-to-day basis.  Finding the time to manage your money and create a budget can seem like the last thing on your to-do list.  First, let’s take an honest look at what a budget is.  A budget is a spending plan for your money. It is an itemized list of where your money is going and a balance of your expenses and income.  This allows you to track how you spend your money, correct any errors, and plan for the future.  Creating a budget is vital so that you know you are not spending more than you are earning.  Those that have budgets are much more financially secure than those that don’t.  Managing your money well can prevent you from going into unforeseen debt and also allow you to have money left over to do what you’ve always wanted to do.  Plus, once you have created a budget, you will feel empowered.  You will have much more control over your spending and feel a sense of ease instead of living your life paycheck to paycheck.

Take an Honest Look at Your Income and Expenses

The first thing you are going to need to do is to get organized.  If possible, gather all your information, such as pay stubs, receipts, monthly bills, credit card statements, savings accounts, student loans, etc. If your income is not steady from month to month, you will want to calculate an estimate of the average income you are making so that you have a clear picture of what you are bringing to the table.  Go back six months to give yourself a conservative estimate of what you can expect.  If you have a joint account with a spouse or a partner, your budget will be much more successful if you do this together. 

Next, make a list of all the necessary expenses that you are responsible for every month.  These will be items such as mortgage/rent, utilities, car payment, childcare, average grocery bills, and cell phone bills.  Open up your checking account online to see if you’ve missed anything.  It can be easy to overlook something, such as bills automatically debited from your account.  Once you’ve created this list, come up with a total, and note these are your priorities.  These are the expenses that you must pay first before spending on anything else.  Now, subtract this total from your monthly income.  What you have left, if anything, will be most important in creating your spending plan.  Knowing how much you have left over each month after the prioritized items are deducted will allow you to see the truth about where your money is going.

Take Control of Your Spending Habits

Now that you have taken an honest look at how much you are making and what your essential expenses are, let’s see where the rest of that money is going.  The fact is, most of us don’t know why we keep coming up on empty each month when we are making a decent earning.  Let’s go back three months and jot down all your extra expenses, such as eating out, entertainment, and shopping.  These are what we would call luxury items.  Purchases that may seem small at the time can add up.  Here’s where you can feel empowered.  Take a look at reality and decide how much you have to spend on these luxury items.  Do you need to eat at home more?  Or perhaps, cut back on those extra Target trips?  You can get out of control when you don’t know how much you have to spend.  Categorize these items and compare them with how much you have left in the bank.  Conservatively decide how much you would like to spend on these categories and put a cap on them so that you know you are not overspending.  Then, consider how much you would like to save each month and where you would like that money to go.

Time to Take Action with a Budget Planner

There are several ways that you can keep track of your budget now that you know how and where you are spending your money.  Honestly, looking online for a budget spreadsheet can be overwhelming because there are so many options out there.  It can be challenging to determine which is best for you.  Keep in mind that this should be an easy process.  If you make it too complicated, you are far more likely to fall off the wagon and get distracted.  So, keep it simple and easy so that you can maintain it daily.  Here are three recommended ways to manage your budget with ease and comfort.

1. Microsoft Excel.  If you happen to own Microsoft Excel already, this is a wonderful way to create a budget.  Numerous preset budget templates are user-friendly and, best of all, free.  Choose the budget spreadsheet that is right for you.  Entering your information is easy and will allow you to track your spending each month.  
2. Budgeting Phone apps.  The saying is true: there is an app for everything.  There are a variety of different apps that allow you to enter and keep track of your budget daily.  Some are free, and some come with a fee.  We will look at and compare some of the best apps in another article.  
3.  If you want to get sophisticated, Quicken is a household finance bookkeeping software that allows you to track your spending, and investments, and save for the future.  This will allow you to dig in and get to the nitty-gritty.  It can also be much more detailed, so it is up to you how much time and energy you want to spend on creating your budget.

You’re all set and on your way to creating a budget!  While managing money takes a little time and effort, in the long run, it sets you up for a more financially secure future.  Congratulations!   

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.