Cash-flow shows balances and receipt of funds, and P&L — revenue and profit. The first one is easier to build. When you have the bank statement for the reporting period, it is easy to post amounts by item and calculate the ten differences between receipts and payments. Even the negative result helps to make conclusions about money management effectiveness can be done.
Fundamental values in P&L are revenue, gross and net profit. The expenses are deducted from the revenue for the specific period (cost of goods, administrative, commercial, and financial fees, taxes). You can add the values list with operating profit if it excludes economic activities influences on the primary one. Then the cost of goods is deducted from the revenue. It is a variable indicator increasing with the growth of sales, and administrative, commercial expenses.
What P&L that have to be taken into account by online-retailer in the report:Incomes:
- Online sales of goods and services;
- Additional funds, for example, interest received from savings in the bank.
- Cost of goods — direct expenses from sales of goods;
- Discounts for clients to increase their loyalty;
- Fixed expenses, independent from sales growth (office rent, utilities, etc.);
- Variable expenses, depending on the sales volume (delivery or advertisement costs).
Business costs are combined in large-scale groups: operating – for workflow organization (rent, utilities); investment – a purchase in long-term operation (terminals in delivering points for customers); depreciation expenses – wear, loan repayment, and taxes.
Expenses list can look like: purchase of goods (purchase «bespoke,» can be done with buyer's prepayment), IT-maintenance (hosting, technical support, connection payment), warehouse and office rent for improving the company status in front of buyers, salary for all team members, taxes, web promotion depending on the product type, market competition and seasonality.
P&L for retail can be expressed in 6 tables in Excel:
- Budget: sales, margin (price minus goods cost), operating costs, salary, transport, and rental costs.
- Sales, margin, and losses: sales by product groups, including a margin for each.
- Operating cash: operating costs, including salary, transport, rental, utility costs, IT, marketing, insurance, equipment, business trips of employees.
- P&L: depreciation (decrease in property value as it wears out).
- Salary: all staff costs according to staffing table.
- Data and constants: rent and utility payments — per 1 sq.m. store (office, warehouse), payroll taxes.
Online-business has to show income and expenses, not upon payment but as it arises (example: rental prepayment should be distributed throughout all paid periods); make sure that income and expenses consort with each other (example: if advertisement launched in January, and you got the first orders in February, you should write down expenses on February); reckon investments in fixed assets (example: the amount of equipment purchase is distributed during the entire period of operation).