Tracking and Organizing Your Businesses Monthly Expenses, Overhead, Income and Profit
Do you know your numbers for your side hustle? No, not the number of followers you have or the number of likes your latest post got, but your financial numbers. The numbers inside financial reports such as a profit / loss statement can shine a lot of light on your business. After all, business by definition is exchanging goods or services for money. This post will walk you through how to use a profit / loss statement for your side hustle so make true money moves.
Explore my $9 Google Sheets Profit / Loss Spreadsheet Template here. If creating a profit / loss spreadsheet is new for you and spreadsheets are not your thing, do not worry. My template is incredibly easy to use and translates your business into numbers in a non-intimidating way.
What Is A Profit / Loss Statement And Why Does Your Side Hustle Need One
If you’re a side hustler or any type of business owner, you should be creating regular monthly profit / loss statements. A profit / loss statement is a financial report that shows you how much your business has earned in profit after expenses and overhead are accounted for. This report is key to your business for examining what your true take home pay as it compares to your income.
A profit / loss statement can also be used for examining and making business decisions. You are able to see what investments are paying off inside your business, where you can cut back, and where your income is flowing in from. All of these factors are extremely important for any business owner to track on a regular basis.
When To Create A Profit / Loss Statement
For best business organization, you want to create a profit / loss statement each month for your side hustle. I usually do this at the very end of each month or at the very beginning of each month (for the previous month). It’s best to do it after all of your numbers are final for the month. This means all income is complete and you won’t be spending any more money.
My Google Sheets Profit / Loss Template here is creating into monthly views. This makes it easy for side hustlers to update month by month and compare time over a year.
Tracking Your Overhead
The first thing you want to track inside your side hustle profit / loss statement is your monthly overhead. This is the cost of running your business on a monthly basis. It’s important to note that overhead and expenses are two different things. Your overhead is regular reoccurring expenses, like subscriptions. And your expenses are one-time costs that occur randomly like, office supplies.
Write down any cost that occurs each month for your side hustle. Sum the total for your monthly overhead amount. And track this amount each month to reflect changes.
Examples of business overhead:
- labor (salary, reoccurring amount)
- phone bill
One of the main things you want to observe with your overhead is the general cost of running your side hustle. Ideally, this should be less than what your side hustle earns. If it cost more to run your side hustle each month than what you side hustle makes, consider lowering overhead or altering your growth strategies. Click here to see how you can grow your side hustles income.
Tracking Your Expenses
After your monthly overhead is determined, next sum together your total monthly expenses. These are the costs that pop up each month at different times or for different amounts. Depending on your business model and how active your business is, your expenses will vary.
Examples of business expenses:
- office supplies
- labor (contract labor, billed hourly)
- one-time purchases
Your expenses may vary month to month. However, they are great to observe any high spending seasons or trends. After these are observed, you can prepare your business by examining how to cut expenses or save for high-spending seasons.
Keep in mind, your business’ goal is for your expenses and overhead combined to be less than your income.
Tracking Your Income
Your income is the last factor to consider for creating a profit / loss statement for your side hustle. You want to record all of the streams in which you earn money for your business. For example, if you’re a wedding photographer and you only photograph weddings, perhaps you record your income as one lump monthly total, or sigmate it into your different wedding photography packages.
Perhaps your business is multi-facetted and you earn income via a digital shop, affiliate income and a podcast. All income from these three streams should be recorded and summed.
Tracking your income like this can also give insight into which areas of your business are bringing in the most and least income overtime. This can help you determine seasonal trends and impact future business decisions.
Determining Your Profit
Finally, your side hustle profit / loss statement should determine your actual profit. Oftentimes we see how much money our business makes and we quickly see that as our income. Unfortunately, profit is not income. Our profit is our income earned minus expenses and minus overhead. And technically, that profit should still deduct taxes and any savings put side.
Understanding your monthly profit is extremely important for any business. You also get to see the simple mechanics behind your profit. This helps business owners tweak things like income, expenses and overhead in order to gain more profit. Which is the ultimate goal, right?
Create Your Profit / Loss Statement Today
No matter if your side hustle is two days old or two years old, it’s never too late to organize your profit / loss statement. The earlier you make recording these numbers a habit, the better. Trust me, your accountant will thank you.
Creating a monthly profit / loss statement also gives you tremendous insight into how your business is actually doing. Say goodbye to waiting for your business to get better and say hello to clearly seeing how you can make that happen. Pulling all of these numbers together inside a spreadsheet or using pen and paper is a great way to get started. You can also use my digital template to save time. Download my $9 Google Sheets Profit / Loss Spreadsheet Template to get started. My actually accountant reviewed this template with me and gave it 5 out of 5 stars. It’s simply, has zero intimidation, comes with a free tutorial video and allows you to track your business month to month.
Understanding how much money your business makes is not enough to understand your business. Take you and your business to the next level by creating your own profit / loss statement.
+ show Comments
- Hide Comments
add a comment