I’m going to give you a demo on how to review your profitability using Xero.
In your Xero dashboard, what we want to do to have a look at profitability in your profit and loss statement (which can be found in the “reports” field). I’ll be using the old report style as you can see more columns on it.
The thing we want to have a look at is your net profit, which is the number found along the bottom of the report. Now, if this demo company was your company, we’ve got some problems here because we are making losses and that is not fun to do.
The idea is to have a look at three months at a time, and compare it against the three previous quarters. As we’re currently at the end of November, your bookkeeping is probably not going to be completed for that month of November anyway, so let’s go back to September. If things have been steady for you since September, go to September, otherwise you might want to have a look at October as your starting month more recently and then have a look at the three months. So if we’re looking at the September quarter, we’re comparing that with the June quarter – which is the first quarter that COVID hit – and then March and December the prior year.
Some key things I want you to have a look at is, how’s your profitability going in the September quarter versus the last few? Hopefully it’s picked up for most businesses – especially after the June quarter which could have been a bit of a question mark, given that most of the country was locked down in parts of the June quarter – but just see how you’re tracking along there.
What I want you to do is even look at December last year. And you can also add more quarters to compare – I believe you could even go up to seven comparable periods. So you’ve got September 2020 versus September 2019, and you can see how you’re tracking versus last year pretty clearly, so have a look at how it’s been trending pre COVID, versus during COVID.
As a business owner, you’ve probably got a rough idea of how your sales might be tracking going into December. Now, the great thing is that most businesses are actually doing the same or better now, than they were before COVID, which is so relieving, and hopefully that’s you.
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