Have you ever pulled your profit and loss?
And you say that does not match my bank account?
This is actually a question I get asked often
Hi, I'm Candus Kampfer. If we've never met before,
I love to help bookkeepers
and business owners customize QuickBooks and create confidence.
And so recently I was asked this question like, Candus,
why does my profit and loss not match the exact amount in my bank account?
And it's a really great question. I've been getting asked this question for years.
So I thought, why not do a little video to explain it to you
to help you see the bigger picture of what QuickBooks is tracking,
because it's tracking more than just your bank account, right?
So let's go in and look at
QuickBooks
and we'll click around a little bit,
whether your desktop or online.
So when you're looking at your profit and loss, specifically,
it's saying during these date ranges,
this is what we spent,
or what we made as income, right? So it's
what income came in during this timeframe?
And then where did we spend our money?
Now, one of the things I love to teach on my customizing QuickBooks workshop
and inside Confidence with QuickBooks is
to think about the pillars of your profit and loss.
So it depends if you are a fiscal business,
or if you are annual, right. So annual is
hold on, I want to just change one setting right,
quick.
So
under Company Preferences, you can choose what timeframe
you are using,
whether you're
a
fiscal business
or calendaring. To keep this simple, I'm gonna make them both the same,
because the other way the report was pulling where it wasn't showing
this as a sample file. So it's like, oh,
real quick,
we'll change that as well.
Okay, we'll make this a little easier to read.
So when we're talking
last year,
what happened last year when you're getting ready for taxes?
And why does it not match your bank account?
One of the things that I want you to consider
is are you cash or accrual-based business, so
accrual is going to be
when you invoice your customers, and when you entered the bills,
and cash is gonna be at the moment the money's exchanged, right.
So you might be thinking, well, I'm a cash-based business,
or I'm selecting cash as my report basis,
this bottom-line number,
if everything is entered incorrectly, it should match what's in your bank account.
That's not necessarily the case.
Why?
Because when you start your bank account for the year, you had money in it,
then you generated revenue, or income,
and then you paid expenses out,
and your bank account just keeps living on.
Right. So those are some of the reasons, there's a few others I'll share with you as well.
So when you're pulling this, and if you think,
Oh, it should match identically, it won't,
because
as I said, you had money that started before. Also,
you may have credit cards that you used
to pay for expenses
that you are showing on your profit and loss, right,
you also might have loans that you spent money on,
and those are not gonna show up,
only the interest expense is gonna show up on your profit and loss
Okay, so when you want to know more about like,
did I do? So the question becomes,
what are we really looking for?
When we're comparing our bank account to our profit and loss?
Maybe you were under the assumption
that
that would tell you if you entered everything in, accurately.
And
what you really need to be doing is putting a check and balance system in place, right.
So some of the things that you could be looking for is,
did I reconcile my bank account?
Did you review your profit and loss and everything's in the right places?
Does your customer
balance
says, are those correct?
Are your vendor balances is correct?
And then are you also reviewing your
balance sheet
to make sure all of your
assets,
all of your loans are all in the right places, right?
So remember,
your profit and loss is just
one report that you get from QuickBooks, there are other reports
if you're wanting to know more about like your cash flow,
you can always check out
what's called a statement of cash flow.
And you can say, okay, this is how much we made as
profit on our P&L.
And then this is how much we have going in or out,
depending on which way it's going.
And then
where do we sit at the end with our cash,
right?
Because it's possible that maybe you got a loan, so you have more money in your bank account.
But that's not income to you on your profit and loss.
So it gets a little bit more,
there's a little more to it,
than just assuming that
that,
that's
that's what it looks like, oh
was I sharing,
I might not have been sharing my screen,
hold on one second, let me share with you my QuickBooks real quick.
So I was showing you the statement of cash flow
and I don't know if I was actually sharing it,
I might have been on my Face...
So you're gonna go to
I was talking about balance sheet which is here.
And then you get your statement of cash flow here.
And then you can choose your date range that you're looking for,
and it will change
and this is where I said the net income
and then these are going to be
your different accounts.
Like where money came in and out of
and where it sits this whereas was talking about for the loan.
Okay, now for those of you who are desktop users,
let's jump in and look at your,
yours so you kind of know what you're looking at as well.
So you're gonna go under Reports
can be looking at profit and loss
and you might be looking at like, okay, what happened?
So this is just telling you, this is just one report. Remember,
it's a
what happened last year
you can run it.
You're gonna choose cash or accrual if that's not something familiar with it.
I would recommend coming to my Customize QuickBooks Workshop,
we talk about
these types of things.
Anyways. And so you're gonna come in here and you're going to say,
Where was my income?
Where is
my expenses? Did I reconcile my bank account?
Did I check all of the different areas
that I need to be checking what I call the check and balance system?
And then
you could go back to your reports, and you can say,
I'd like to see a statement of cash flow.
Don't forget, you're always gonna wanna be checking out your balance sheet.
These are all different reports.
But the question becomes,
why are you looking at your profit and loss?
And
when you're looking at your profit and loss compared to your bank account?
What are you trying to verify?
And there are other ways to verify it,
if these numbers don't match, that's not necessarily
an indicator that you've messed something up.
I hope that makes sense.
So this is where you would see your net profitability
where your money came in,
where your money went out,
and where you're at at the end.
Okay,
so
where's your net change in cash flow?
So if you have loans, those types of things,
shareholder,
right?
So if you're putting money into your business,
or you paid for business expenses,
outside of
your business bank account, maybe you paid for them personally,
and you did an adjusting entry
to track the expense,
and
track,
whether it was to shareholder, owner,
equity or a loan,
those all are also impacting your profit and loss
because their expenses but maybe not paid out of your business account.
If you've been under the assumption that those will always match,
they won't, because there's different
factors in them.
Let me know if this video helped you.
This little training helped you understand more about
looking at different reports and why
your
bank account
and your profit and loss
are not always going to be the exact same number in the end.
Hopefully,
you have profits leftover
year after year in your bank account
that helps you get through
those months where you need additional income
or additional cash flow. I should say.
If you haven't saved your seat for our workshop that we're hosting,
and you would like to attend, I'm doing a customizing QuickBooks workshop.
You can save your seat at canduskampfer.com/workshop
Let me know if you have any other questions about this topic.
Leave a comment down below.
And if you're new here, don't forget to subscribe and like this video.
I look forward to seeing you
inside my next tip and trick.
Have a great day.
Talk to you soon.
Bye.