Profit and loss (P and L) are essential roles in any organization that requires an exceptional individual to handle. Therefore, the position is always reserved for an individual who perfectly understands the job description and understands the responsibility attached to that position. Being the person in charge of p&l responsibility in any organization, your role involves monitoring the entire organization’s income and expenses daily. Besides, you directly influence how the company resources are being used, shared, and distributed. So, today’s topic- P and L Responsibility.
People in charge of the organization p&l responsibility are often the person who finalizes any spending or expenses incurred by the business. They often find ways to cut budget, expenditure and ensure any program the business invests in generates a positive return on investment.
Considering the return on investment management of any company or business, cutting high costs and increasingly becoming important with the economic situation and realities of the company. In case of economic downtime, the p&l person ensures s/he manages the company resources effectively to avoid any push back, which might eventually make the company operate at a huge loss. This and many other responsibilities are what the recruiters are looking out for when hiring a p&l personal for any organization.
The Profit and Loss responsibilities
One of the major questions that many people tend to ask company leaders is whether a person in charge of a product at an organization should be given the role of p&l for their product or not. More so, some people also believe that the responsibility of p&l individual weight above the regular product owners. That being said, p&l individual responsibility is far greater than the role performed by a product manager.
Certainly, you would believe that for a business to survive, scale, and open new branches, the profit gain must be more than the losses at all times. But, on the other hand, too many expenses by the organization can ultimately lead to losses. Profit and loss management then means how a business handles its losses and profits concerning income and expenditure.
- As a p&l manager, your major duties are increasing your business revenue and minimizing the expenditure to the barest minimum. Therefore, you can easily make use of your organization’s current profit and loss statement to determine if your business is running at a profitable stage or not.
- Understanding your p&l statement would also give you insight into what needs to change, where you need to cut down expenses, and the best way to maximize your company income. So here are some major responsibilities assigned to a p&l manager in any organization she/he might be functioning.
- Creating p&l statement for the organization monthly. Of course, for a business to be profitable, its income must be more than the expenses incurred monthly, and this is one of the major ways to determine how the business is thriving. Therefore, a p&l manager must develop the monthly p&l statement to understand which department spends more, which spends the least and which department earns more, and which one earns the least. Although many business owners might prefer to have the p&l statement weekly, some prefer to have it bi-weekly, monthly, bi-monthly, quarterly, or annually.
- The reports break down the expenses in an easier way to read and understand for the business owner. With the breakdown done by the p&l manager, the business owner can easily see the sector that makes the most money and the sectors that make the least money in the organization. Meanwhile, investors and lenders such as financial institutions can easily determine how viable the business is through the p&l statement developed by the p&l manager.
Comparison Of P&L Statement
As a business tries to emerge and scale-up, the organization would incur different expenses monthly. It is the responsibility of a p&l manager to compare previous p&l statements with the new ones to see if changes implemented have been reflected or which month performs better regarding expenditure and income. It would help you determine if the business is growing or stagnant or possibly if the business is declining. For instance, a p&l statement for March shows an income of $15,000 and expenses of $4,000, while the p&l statement for June shows a loss of $3,000. Comparing such p&l statement would easily show what was done right in March and what was done in the wrong way in June.
Making Necessary Changes To The Organization Finances
Aside from comparing the p&l statement, the p&l manager is also responsible for making changes to business finances which would affect the income and the incurred expenditure of the business. When the p&l manager compares the p & l statement, he/she would be able to understand the business weakness, which month performs better, and the reason. Recognizing the problem can let the p&l manager develop a better strategy and implement necessary changes to the business operations. Managing profit and loss also means developing innovative ways to increase sales, increasing the monthly income the organization realizes.
Engage With The Business Accountant.
Although p&l management is an internal role, it is also essential to meet with the organization accountant and discuss the new plan with the person in charge. Your accountant could also help in contributing to the success of the proposed implemented strategies for the p&l policies you are hoping to implement in the organization.
The Importance Of A P&L Manager In A Business
Of course, every business wants to scale and increase its revenue through sales and its client base. If you are hoping to have a healthy business that manages its business profit and losses effectively, then there is the need for a p&l manager in the organization. You might need to employ the services of a p&l manager to make adjustments to the business payment terms, cut down some expenses, and effectively increase sales. Proper management of the business p&l can easily influence your business strategies, how your business operates, the business decisions you make, and how eventually your business grows.
P&L Responsibility Faqs
What does it means to manage profit and loss?
To manage profit and loss for a business means to handle the way the organization makes money through income and spends the money. It means working towards generating more income and minimizing the organization’s expenditure. For example, the manager might compare the p&l statement to decide that it will support policies and new ways of improving the income. The business profitability can also be easily determined through the use of p&l.
What are profit and loss, and why is it necessary to manage them?
A p&l statement easily gives the company a broad overview of the organization’s financial standing. Therefore, understanding the p&l statement should be the priority, and it must be read correctly and help you reduce unnecessary costs and thereby increase the organization’s revenue. Meanwhile, the p&l statement provides you with increased revenue ways and the organization’s financial performance. It also provides an insight into how the company might easily manage the company p&l.
How do you manage the p&l in a project?
There are some tips and things you should consider regarding p&l statements and the role itself. In addition, there are some ways you can easily manage the p&l of any organization. Here are some of the tips you should follow:
- It is important to monitor the profit and loss reports consistently.
- Combining monitoring of the p&l statements and how cash flow is being utilized in the organization by both accountant and the p&l manager would be the best move towards increasing the organization’s income.
- You can outsource the service of a p&l manager to an external team if the organization does not have enough capital to employ in-house personnel.
Managing the p&l as a project within the organization is the best thing you can do for a business, mostly because it would be the best decision for you as the organization head. Meanwhile, hiring a seasoned candidate for the role must be your priority as a p&l recruiter.
Is p&l a skill?
Discovering new ways to increase income for an organization and keep the cost of expenditure lower is an essential skill needed in the business world. This is major because businesses that thrive have their expenditure lower than their income, and for you to scale up a business, that means your p&l skills must be top-notch. The individual must be able to source and connect while also implementing new ideas from people and integrating this idea across the board and all organization departments.
What Is A Good P&L Percentage?
You might want to understand what a good percentage of p&l is for an organization. What is a good margin, a good margin varies based on organization performance in the past and what the organization aims to achieve? However, the general rule of thumb is that a 10 percent net profit margin is considered average while a 20 percent margin is considered high or good.