“Not enough detail,” is kind of caused by a couple of things. When you set up a Xero account or a chartered account, the list of expenses or the list of income, will only give you a standard list.
Let’s take subscriptions for instance, we’re a service business and we have at least 20 software subscriptions that we pay for. If I had one account that showed me subscriptions, I’m not going to really be able to make decisions or do much with seeing one number there and it’s fluctuating up and down. And so, one of the things we’ve done and we encourage you to do is, for big grouping expenses like that, is actually detail, “Okay, we paid for Xero, cool; that’s a separate line item. We pay for HubSpot, cool; that’s a separate line item.” so we can see what that expense is doing month to month.
Instead of having a nice tidy P&L on one page, you might have a three or four page profit-and-loss statement. But you’re going to get more from that than you are going to get from that one page.
It doesn’t really tell you too much detail.
This ties in with the bookkeeping, all of this stuff is related. Your bookkeeper will then need to take a step further and make sure they’re coding what the certain expenses are to the right account.
There’s a bit of work involved in setting all of that up. But once it’s set up, it is a lot easier to make decisions and keep an eye on expenses so that they don’t get away on you.
The reason why we say ‘not enough detail’ is because people always view the high-level version and they can’t get, “I don’t understand, why is my expenses suddenly 40 grand for one month, then 10 grand for another?” The reason why we say this, is because you didn’t spot the detail level to bookkeep first.
It doesn’t mean that you have to review it at every single dollar. Yes, you can. It depends on your budgeting and sizes of expenses, but once you get that first bit out of the way, the detailed instructions on how to actually keep your P&L healthy and clean, then you can start having conversations at the higher level, trusting the numbers. It’s all about trusting those numbers, and having that detail gives you that trust.
Catch the full discussions and watch the full webinar, ‘Numbers for non-accountants’ at https://learning.benwalker.com/courses/NFN
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