Understanding Your Numbers: Financial Statement Basics for Tradies
As as a Tradie, you don’t need to be a financial whiz to get a handle on your business’s financial health. With the right support, understanding your numbers can be simple and powerful. A bookkeeper can give you regular reports with a bit of analysis, and you can work with your accountant every six months for a deeper dive. Let’s start with the basics.
Start with the Profit and Loss Statement
The Profit and Loss Statement (P&L) is your go-to document. It tells you:
How much money came in (income).
What went out (expenses).
Whether you’re making a profit or running at a loss for the period.
This is where you can see if your business is earning enough to cover costs and leave you with a healthy profit.
Income vs. Expenses in the Right Period
It’s important to understand the timing of income and expenses:
If you send out invoices but don’t get paid straight away (credit terms), your income may not line up perfectly with when you actually receive the cash.
Similarly, if you buy materials on credit, the expense might not match up with when you pay for it.
This timing difference can affect how you view your profit for a period. Your bookkeeper can help you understand this when preparing your reports.
What About GST?
If your business is registered for GST and you’re on a payables basis, your GST reports might not match up with your P&L. For example:
GST is based on when invoices are issued or received, not when cash changes hands.
This means the GST you owe or claim back could include amounts from invoices you haven’t paid yet.
Understanding this difference helps you plan better and avoid surprises when it’s time to pay the taxman.
How a Bookkeeper Can Help
Your bookkeeper does more than just keep things tidy. At the end of each month, they can:
Send you management reports, including your P&L.
Highlight key figures, like income, expenses, and profit trends.
Help you spot unusual numbers, like rising costs or slow-paying customers.
This regular check-in gives you a clear picture of your business and helps you make adjustments as needed.
Check In with Your Accountant
While your bookkeeper handles the month-to-month details, it’s a good idea to meet with your accountant every six months. They can:
Perform a deeper analysis of your financial statements.
Help you plan for big decisions, like buying equipment or hiring staff.
Review your tax position and ensure you’re on track.
Keep It Simple, Start Small
You don’t need to know everything all at once. Start by:
Looking at your P&L each month.
Understanding how your income and expenses line up.
Asking questions about anything that doesn’t make sense.
With your bookkeeper and accountant in your corner, you’ll soon feel more confident about your numbers and the decisions you make for your business.
Let Us Help
At Admin for Tradies, we specialise in making bookkeeping simple for Tradies. We’ll keep your financial data accurate, provide clear reports, and help you stay on top of your business’s performance. Ready to make sense of your numbers? Get in touch for a free no obligation chat.