L — Lighten: Spot Check for Errors

Step 2 of 7: L — Lighten | The Blizzard Breakthroughs CLARIFY Method™

Spot Check for Errors

Your bookkeeper gives you a Profit and Loss statement. Before you plan anything with it, make sure it is correct.

Start here: confirm your P&L uses accrual accounting, not cash accounting.

Cash accounting records money when it moves in or out of your bank account. Accrual accounting records sales and expenses in the month they actually happened, whether or not the money moved. Only accrual shows you what the business truly earned and spent in a given month.

If your P&L is on a cash basis, ask your bookkeeper for the accrual version before you go any further. Everything you build in the next sections depends on it.

Once you have an accrual P&L, spot check it for these:

• Expenses sitting in COGS that belong in Admin or Marketing
• One-time or non-recurring expenses that will not happen again
• Any sales or expenses that belong in a different month than the one they appear in
• Personal expenses that should be subtracted because they are personal, not business
• Expenses for canceled services, or anything else you no longer pay for
• Admin or Marketing totals that jump against the prior two or three periods without a clear reason

You'll walk away with:

A corrected Profit and Loss statement you can trust as the foundation for your Target Profit and Loss.

← Back to Curriculum | ← Previous | Next: A — Anchor: Target Profit and Loss →