You don’t need an accounting background to run a successful business — but you do need to understand your core financial documents. Your profit and loss statement (P&L) shows how much money comes in, how much goes out, and what’s left at the end of each month. Reviewing it regularly helps you spot trends, prepare for seasonal shifts, and understand your true cashflow position.
Your tax return works alongside your P&L and reports your revenue, expenses, and taxable business income. While many owners try to lower their taxable income through deductions, those strategies can also lower the value of the business if the financials become unclear or artificially reduced.
Whether you plan to grow, stabilize, or sell your business in the future, clear and consistent financial reporting is essential. Just 15 minutes per month reviewing your numbers can strengthen your decision-making and your longterm business value.
Transcript:
Selling a business comes with more complexity than most owners expect. You might plan to sell to an employee, bring in an outside buyer, or transition the practice to a larger company or investment group. No matter the route, one factor determines whether the sale is even possible: cash flow.
Let’s talk Business 101. If you come from a business background, great — you probably already understand how many of these pieces fit together. But if you don’t, maybe you’ve only touched on it or you rely entirely on your accountant. Either way, these are crucial things for you to pay attention to as a business owner on a very fundamental level. When we think about how your business operates, one of the core tools is your profit and loss statement.
Your profit and loss statement is designed to show how much money is collected, how much is spent on expenses, payroll, and business development, and what’s left over at the end of each month. Every month will look different. If you use QuickBooks or another platform, you can run P&Ls monthly, yearly, or combine periods. The key is understanding whether your business is consistent or if it goes through cycles during different seasons — because that bottom-line number tells you a lot about how much cash should realistically be in your business bank account and whether you need to prepare for seasonal fluctuations.
Some professional service businesses operate steadily year-round, while others experience ups and downs. Keeping a close eye on this matters. On the other side of your financial picture is your tax return. Your tax return is built from much of the same information as your P&L, but it specifically reports your revenue, expenses, and what’s left over to be taxed. For example, if you collect $1 million in revenue and have $500,000 in expenses, you have $500,000 in business income that must be reported. For S corporations and other pass-through entities, this number moves directly onto your personal 1040 tax return.
It’s important to pay attention to these numbers consistently because your P&L tells the real story of how your business is performing. Growth is essential — otherwise the business becomes stagnant, risks decline, and may eventually lose value. Your tax return adds another layer: many owners look for ways to reduce taxable income through retirement contributions, equipment purchases, or other deductions. But every time you reduce your taxable income, you also reduce the reported profitability of your business — which can hurt its value when it comes time to sell.
The murkier your financials are, the harder it becomes to understand your true business value and negotiate for a fair sale price. No matter what phase of business you’re in — growth, maintenance, or preparing to sell — cash flow and clean financials matter. Even reviewing your numbers for just 15 minutes each month can make a meaningful difference in your understanding and decisionmaking. If you want to explore this further, schedule 15 minutes to talk. Follow the phone number shown at the end of the video and send us a text or give us a call so we can coordinate a time.
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27