It's that time of year again for your business. The dreary winter not only brings bad weather, but also calls from your accountant who is ready to start gathering tax information. There are fundamental financial statements you review with your accountant each year. For this conversation we will focus on only one of the fundamental financial statements; the Income Statement. The Income Statement, also known as a Profit and Loss or P&L Statement, displays the net income for a specific period by reviewing the Sales for the timeframe against the Cost of Goods Sold and Expenses.
We will not be covering beginner topics, but if that is where you would prefer to start please visit our Income Statement Webinar. Instead, we want to highlight specific tools in Design Manager that you can use to get the most out of your Income Statement. So, grab a hot cocoa and let's discuss.
Income Statement Types in Design Manager
Let's start with the types of Income Statements in Design Manager: Monthly, Quarterly, Yearly, and Comparative for a Custom Period. Therefore, your first choice is what time period you want to review on your Income Statement. Most business owners will look at their Income Statement each month; some a little more, some a little less. Regardless, Design Manager gives you the flexibility to run the Income Statement for the time period you need.
Income Statement Formats in Design Manager
The second choice for your Income Statement is format. Design Manager offers five formats:
- Year-to-Date, Budgets and Variances
- Year-to-Date, Prior Year
- Year-to-Date, Budget Year-to-Date, Prior Year
This format will show your time period; Month or Quarter and a column for Year-to-Date. Here is an example:
2. Year-to-Date, Budgets and Variances
This format will show your time period; Month, Quarter, or Year with a column for Budget and a column for the Variance between actual and budget. Then it will show Year-to-Date with a column for Budget Year-to-Date, and a column for Variance between actual and budget. This format is used to compare how well your company did versus your predicted budgets. Here is an example:
If you want to start using this format with budgets, you can enter budget numbers for your accounts in the Accounts Glossary. Click Accounts, Highlight the Account, Click Edit, Click the Budget tab and enter monthly budgets.
3. Year-to-Date, Prior Year
This format will show your time period; Month or Quarter with a column for Year-to-Date, a column for Prior Year and then a column for Prior Year-to-Date. This format is used to compare how well your company did versus the previous year. Here is an example:
4. Year-to-Date, Budget Year-to-Date, Prior Year
This format will show your time period; Month or Quarter with a column for Year-to-Date, a column for Budget Year-to-Date, a column for Prior Year and then a column for Prior Year-to-Date. This format is a combination of formats two and three so you can see the budget information and prior year information all on one format. Here is an example:
This format will show your time period; Month, Quarter, or Year with a column for Prior Year, a column for Increase or Decrease, and a column for Percent Change. This is my favorite format as it shows what areas your business is growing, if your business is sticking to it's goals and where possible problem areas exist. Here is an example:
Income Statement Layouts in Design Manager
In addition to types and formats of the Income Statement, you can further customize it by creating up to three different layouts. Layouts are used for customizing what information shows and how the information is organized. For example, you as the business owner may want to look at each account so you need all the accounts listed. However, your accountant may only care about the accounts as groups like Revenue and Expenses, instead of seeing individual accounts.
Click the Layout Button in the upper right corner
If you want to change Layout 2 to be the layout to send to your accountant, rename the Layout to Accountant Layout by clicking the Rename button.
Finally, click New Group and start dragging and dropping your accounts under your new Groups. You can then organize like accounts together under Groups so only the Groups show on the layout by deselecting the Show Accounts option. This produces a more concise layout for your accountant.
DM Black Belt Tip: Try the Twelve Month Income Comparison Report. Its similar to the Income Statement, but displays account activity for each month of a given calendar year and is found in the same General Ledger Reports folder.
Now that you know about the different ways to customize the Income Statement in Design Manager, make shaping up your Income Statement a 2017 Resolution. If you have experience using Income Statement formats and layouts in Design Manager already and want to join the conversation, please use the comments below.