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Monday, August 17, 2009

Can You Read A P&L Statement?

I'm not kidding. I'm asking a serious question. As a boss, a manager, can you read a Profit and Loss Statement?

You might be wondering why I would ask such a question, but there are plenty of bosses out in the business world who really don't know how to tell if their office, branch, or even department is meeting or exceeding budget...or worse yet, if their team is behind budget.

Businesses are in existence to make money. They need to be able to regularly track revenue against expenditures. Even charity organizations want to ensure the only money leaving the organization is money that they plan to give away.

Let's get back to the managers. I'm not going to judge. Maybe you don't know how to read a P&L because:

  • You are a new manager and no one taught you when you got into your job.
  • Maybe math is not your strength so you've just avoided the whole idea.
  • Maybe you know how, sort of, but it's just not that big a deal to you.
Regardless, you need to figure out how to do it...and fast. Perhaps your current supervisor may not put a lot of emphasis on this part of your duties, but you can't expect that to last forever. So:

  • If you feel comfortable, ask your boss. You've got a window of learning for some period of time after you begin leading your office.
  • Go to the finance person assigned to your team and request a "class" (chances are that they'll be so thrilled that you want to know that they won't tell anybody).
  • Get a fellow manager or your mentor to quietly show you how.

I don't care how you learn this, but just ensure you do. If you can't read a P&L and consequently manage the cash in and out of your group, it will catch up with you sooner or later. Most importantly, how can you help your company grow if you can't measure how your team is doing?

Is the ability to read a Profit and Loss statement as big a deal as I'm making it? Do you know of other reasons a manager may not know how to read a P&L? Do you have suggestions as to the best way to learn other than what I mentioned?

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