Over 30 plus years I would guess I have reviewed over 1,000 companies’ financials.
Maybe it’s actually 876 if it could be audited. But a lot of them for sure.
And one thing nearly all of them have in common is the multiple page P&L.
Some stretch on for 4 pages plus. By the time you reach net income, revenue and gross profit are several pages back and you need to flip back and forth to see the big picture.
There are accounts with $1,789,387 of expenses sitting above
a line item for postage at $43.11,
that is above rent of $204,000.
It is very hard to get your bearings, and to sift out the important from the less so.
You get lost in a P&L’s detail when you don’t consolidate related expenses. You need to look at a consolidated version of your P&L if it's going to help you make decisions in the future.
Ideally, your P&L should fit on one page.
Where the statements get unwieldy is typically within Operating Expenses, where so much can be consolidated to refine the picture.
In my experience, "Office Expenses" can capture half of the multi-page operating expense line items on most P&L's.
If you are preparing a detailed budget, then it makes sense to drill down to the individual account level.
But if you want to get a handle on how your company is performing, the details get in the way.
Margins and totals are the results you want, specifically revenue growth, gross margin if it applies, and operating profit margin. You also want to look at all expense categories as a percentage of revenue to see what trends are taking place that impact profit levels.