Profit and Loss - What Does It Tell You?
Updated: Aug 27, 2021
Looking at your financial results, in other words, your profit and loss can be a great way to see trends over time. In this short post, we will examine the Profit and Loss sheet and explain what conclusions you can draw from the information available on this sheet. Let’s go.
What Information Does the Profit and Loss Sheet Give You?
Typically a term used in corporate finance and accounting, the Profit and Loss Sheet has a different meaning when it comes to our personal finances. Yet, the core idea is the same. It aims to show you whether your income, expenses and overall financial behaviour leads to a positive or negative result over a given period of time. It's one of the personal budget excel templates in Nordveld that can provide strategic insights.
Information in this sheet makes it obvious whether you are staying consistent with your spending goals and coming closer to your savings targets or something breaks in the process.
The sheet is especially useful for the purpose of finding macro trends. Discovering these trends can help you address poor habits that could be a roadblock in your quest for financial freedom and slow you down.
To give an example, if your goal is to save at least 1000€ per month and you consistently see that every third month you do not reach that target, it could be useful to examine the reasons why that is happening. Perhaps your target is too high to keep consistent (leading to backlashes 😤). There could also be an aspect of your life that tends to escalate costs, particularly every 3rd month. Or maybe you have an expense or subscription that always catches you by surprise every quarter!
In every case, seeing the causes of such events gives you the necessary insights to adjust your behaviour in a way that fits your lifestyle.
How Does the Profit and Loss Sheet Function?
Data that shows in the Profit and Loss sheet is currently only pulled from connected bank accounts and it’s completely automated. Right now, we are also working to enable manual accounts information to be considered when calculating your profit and loss.
Until then, if you decide to edit any fields manually, it will overwrite the automated data but only until the next sync.
You can see that data is generated each month on the same date. The “Income” column displays your total income summed from all connected accounts, while the “Expenses” column does the same for your expenditures during the one month period.
The “Result” column shows you whether you made more this month than you spent (positive result) or your expenses went above your income. It’s a good way to see the end result of our monthly budgeting efforts. Naturally, as time passes by, you want to achieve a greater and greater positive result taking your personal finances to a whole new level.
The good news is with Nordveld Flow, you can achieve this easier than ever before. Automated and effortless.