A profit and loss built to show your margin, not just your total. Monthly income statements with real comparatives, from a Cedar Rapids accountant who works with trades.
Income Statement Preparation in Cedar Rapids, done the Brightside way The income statement is where profitability lives. Income statement preparation delivers a P&L you can actually read: revenue, cost…
Read the guideA cleaning company owner in Cedar Rapids showed us a profit and loss with sixty-two line items and no gross profit line anywhere on it. Wages, supplies, fuel, insurance, software and advertising all sat together in one long alphabetical list.
She could tell you the business made $47,000 last year. She could not tell you what it cost to deliver a single job, because nothing on that report separated the cost of doing the work from the cost of running the company. When we rebuilt it, commercial contracts were running at 31 percent gross margin and residential at 48. She had spent two years chasing commercial work because the contracts were bigger. Her monthly bookkeeping had been accurate the entire time. The report just could not answer the question.
Income statement preparation is building that report so it tells you something you can act on, rather than a number you can only file.
Also called a profit and loss, or a P and L. The name changes, the job does not.
The income statement covers a period of time and answers what came in, what it cost, and what was left. That is different from the balance sheet, which is a snapshot of what you own and owe on a single day.
Most owners read the profit and loss and ignore the balance sheet, which is the opposite of what lenders do. Both matter, and the two are checked together every month as part of the same work. See balance sheet preparation for the other half.
As a Cedar Rapids accountant working mostly with trades and service businesses, the difference we see between a useful income statement and a useless one is almost never accuracy. It is structure.
31% versus 48%Commercial contracts were bigger and worth considerably less. Two years chasing the wrong work, because the report had no gross profit line and nobody could see the difference.
Under everything else, an income statement is four numbers in order.
What you billed for work in the period. Broken out by service line if the file is set up properly, so you can see which work is growing.
What it cost to deliver that specific work. Materials, subcontractors, and the wages of people doing the work. These costs exist because the job exists.
Revenue minus cost of goods sold. This is the single most useful number on the report and the one most small business files cannot produce.
Everything else. Insurance, office costs, advertising, admin wages, software. Subtract those from gross profit and you have net profit, which is what most people mean when they ask if the business made money.
If your file does not separate this, your income statement cannot tell you anything useful about pricing.
The distinction is simple. Cost of goods sold moves with the work. Do more jobs, spend more on materials and crew wages. Operating expenses mostly do not. Your insurance premium does not change because you did four extra driveways in June.
Once those are separated you get a gross margin percentage, and that percentage is what tells you whether your pricing works. Net profit alone cannot do that, because a good net profit can hide a service line that loses money while others carry it.
Most small trade files put everything in operating expenses, usually because that is how the default chart of accounts arrived. It is not wrong in a bookkeeping sense. The books still balance and the tax return is still correct. It just means the owner has never seen a gross margin, and gross margin is the number that changes decisions.
Net profit tells you whether the year worked. Gross margin tells you why. A business can post a healthy net profit while half its service lines lose money and the other half carry them.
Six problems, all common, all fixable.
The last one is worth sitting with. A report that is technically correct and never read has the same practical value as one that is wrong.
Four checks that catch most of what goes wrong.
If not, the file has no cost of goods sold section and you have never seen your margin. That is the first thing to fix.
A working income statement for a small trade business is usually twenty to thirty lines. If yours runs three pages, the chart of accounts needs pruning.
Every line as a percentage of revenue is more useful than the dollars, because it makes months of different sizes comparable.
A month where materials were nine percent of revenue when they are usually thirty means something got coded wrong or landed in the wrong period.
A single month tells you almost nothing. The comparison is where the information lives.
A month showing $34,000 revenue and $6,200 profit is a fact without meaning. Against last month it becomes a direction. Against the same month last year it becomes a trend, which for a seasonal business is the only fair comparison there is.
We produce three views. The month itself, the month against the same month last year, and the year to date against the prior year to date. That combination shows both the immediate picture and whether the year is actually going where you think.
For businesses that bid work, the same information broken out by job comes from cost accounting, which sits on top of a properly structured income statement.
This matters more in Cedar Rapids trades than almost anywhere else in the reporting.
Comparing October to September in a lawn care business tells you that autumn happened. It does not tell you whether the business is performing. Landscaping and mowing revenue drops every autumn regardless of how well anything is run.
The honest comparison is October against last October, and the year to date against the same point last year. Anything else produces alarm in November and false confidence in May.
Snow work runs the reverse, and businesses doing both have two overlapping seasons that make a naive monthly comparison close to meaningless. Building the seasonal view once, from your own history, fixes the problem permanently.
The same business can show very different profit depending on the method.
On cash basis, income appears when the money arrives and costs appear when they are paid. Finish a $22,000 commercial job in March and get paid in June, and March looks poor while June looks excellent. Neither is true.
On accrual, the revenue lands in March with the costs that produced it, which is a far more honest picture of how the month actually went.
Most small businesses file on cash and it is often the right choice for tax. That does not stop you looking at the business on accrual, and for anyone with long collection cycles or commercial work we would suggest doing both. Your CPA decides what gets filed.
What belongs in cost of goods sold changes by trade, which is why templates fail.
For construction and framing crews around Cedar Rapids and Marion, cost of goods sold is materials, subcontractors and field labor including burden. Office wages and the truck insurance are operating expenses. Getting that split right is what makes the gross margin real.
For lawn care and landscaping in Robins, Hiawatha and out toward Lisbon, it is crew wages, fuel for the trucks and mowers, and plant material on installs. Equipment depreciation usually sits below the line, though there is a reasonable argument either way as long as it stays consistent.
For cleaning companies, it is cleaner wages and supplies. Because supplies are a small share, the margin is driven almost entirely by labor efficiency, which makes gross margin by contract the number worth watching every month.
We work across the whole service area, out to Mt Vernon, Ely, Swisher, Springville, Bertram and Covington.
The same underlying data, arranged for two different readers.
Both come from one properly structured file. The mistake is letting the tax version be the only one that exists, because then the report arrives ten months after the decisions it should have informed.
Every account matched to a statement first. A report built on unreconciled accounts is a guess with a header.
Costs of doing the work above the line, costs of running the company below it, owner draws in neither.
Month, same month last year, and year to date against prior year to date.
A short note in plain words on what moved and why, so the report is read rather than filed.
You have more than one type of work, you price your own jobs, or you have looked at your profit and loss and not known what to do with it.
You have one service, one price and no direct costs beyond your own time. Then revenue minus expenses genuinely tells the story and there is little to restructure.
Twenty to thirty lines, percentages shown, comparisons included. If a report needs explaining every month, it is the wrong report.
Cost of goods sold above the line, overhead below it. That one change is what turns a filing document into a management tool.
Every month, in a couple of sentences. Numbers without interpretation get filed and forgotten.
Part of the monthly service, not an add-on.
Flat monthly fees start at $350, set by transaction volume, how many accounts need reconciling and whether you run payroll. Income statement preparation, comparatives and the monthly review are included at every level. If the chart of accounts has to be restructured first, that is usually part of onboarding rather than a separate charge. Details are on the pricing page.
Open your profit and loss and look for a gross profit line. If there is not one, you have never seen your margin, and that is the single most useful number the report can give you.
It starts with a free Books Health Check. Fifteen minutes, screen shared, your file open. We look at whether the report separates cost of goods sold, how many lines it runs to, and whether comparatives are being produced.
Most of what makes an income statement useful is structural, which means it can usually be fixed once rather than managed forever.
Call (319) 382-9017 or use the contact page. You get a real reply within one business day.
If the income statement is not where the question sits, these might be closer.
Yes. Income statement, profit and loss, and P and L all mean the same report. Accountants use the first, most owners use the second.
It means costs of doing the work and costs of running the company are mixed together, so you cannot see your margin. It is fixable by restructuring the chart of accounts, usually in one pass.
Field labor that delivers the work belongs above it, in cost of goods sold. Office and admin wages belong below. The split matters and it should stay consistent year to year.
Usually timing or loan principal. Profit does not account for money already spent on equipment, principal repayments or owner draws. The balance sheet explains most of it.
For most small trade businesses, twenty to thirty. Enough to see what matters, few enough that you actually read it.
You can, and for seasonal work it usually misleads. Compare to the same month last year, and watch the year to date figure alongside it.
No. We do bookkeeping, job costing, payroll support and the reporting around them. Sales tax filings are not something we take on.
The free Books Health Check takes fifteen minutes and answers what the articles can't: where your books stand.
Get my free Books Health CheckFlat-fee bookkeeping for small businesses in these cities and everywhere between.
