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An income statement is one of the essential financial documents for any business, offering a clear snapshot of a company’s financial health. Understanding and effectively using an income statement is crucial for small businesses to monitor profitability and make informed financial decisions. In this article, we will break down what an income statement for small business is, how it works, and why it is a key tool in financial management.
\n\n\n\nAn income statement also called a profit and loss statement (P&L), summarizes a business’s revenues, expenses, and profits over a specific period. Unlike a balance sheet, which shows a company’s financial position at a single point in time, the income statement covers a defined time frame, such as a month, quarter, or year. It reveals whether a business is operating at a profit or a loss, helping small business owners understand their financial standing.
\n\n\n\nEvery income statement for small businesses follows a standard structure, with a few essential components that provide detailed insights into the company’s performance. Here’s a breakdown:
\n\n\n\nThe revenue section is typically the first item on the income statement. It represents the total sales or income generated from the business’s products or services during the reporting period. For small businesses, it’s important to track all income streams, including both operating and non-operating revenue. Monitoring revenue over time helps you understand the growth and performance of your business.
\n\n\n\nCOGS refers to the direct costs of producing or selling goods and services. This includes materials, labor, and any other expenses directly related to production. By subtracting COGS from revenue, you can calculate the business’s gross profit. For small businesses, reducing COGS can have a significant impact on profitability. Learn more about COGS in our article “COGS vs Operating Expenses: What is the Difference?”.
\n\n\n\nGross profit is calculated by subtracting COGS from revenue. It reflects a company’s profit after deducting the costs directly related to production. A higher gross profit indicates efficient production and sales processes. Understanding this number allows small business owners to gauge how well they are managing production costs.
\n\n\n\nOperating expenses encompass all the costs that a business incurs to run its day-to-day operations, excluding COGS. Common operating expenses include rent, utilities, marketing, salaries, and office supplies. Keeping track of operating expenses is crucial for small businesses to manage their overhead effectively. For more detailed guidance on managing and tracking these expenses, check out our article “How to Keep Track of Business Expenses for Your Small Business”.
\n\n\n\nEarnings before tax (EBT) shows the income earned by the business before taxes are deducted. This number is calculated by subtracting operating expenses from gross profit. It serves as a clear indicator of the company’s profitability before tax obligations come into play.
\n\n\n\nNet income is the final figure on the income statement and shows whether the business has made a profit or incurred a loss during the reporting period. It is calculated by subtracting all expenses, including taxes and interest, from the total revenue. A positive net income indicates profitability, while a negative figure means the business is operating at a loss.
\n\n\n\nThere are two primary types of income statements commonly used by small businesses: single-step and multi-step. Choosing the right one depends on the complexity of the business and the level of detail required.
\n\n\n\nA single-step income statement simplifies the reporting process by listing all revenue items together and then subtracting all expenses in one calculation. It is ideal for smaller businesses with straightforward operations and minimal complexity. This type of statement is easier to prepare but offers limited detail for deeper financial analysis.
\n\n\n\nA multi-step income statement provides more detailed financial information by separating operating and non-operating activities. It includes intermediate calculations, such as gross profit and operating income, making it useful for businesses with more complex operations. A multi-step income statement demonstrates financial maturity and operational efficiency for small businesses seeking investment or loans.
\n\n\n\nCreating an income statement involves several steps. Whether you’re using a small business income statement template or preparing one manually, here are the key steps to follow:
\n\n\n\nSelect the period you want to cover in the income statement. This could be monthly, quarterly, or annually, depending on your needs. Regular income statements allow small business owners to track financial performance and make timely adjustments.
\n\n\n\nCollect all the necessary financial data, including revenue, COGS, operating expenses, and any non-operating income or expenses. Accurate data collection is essential for producing a reliable income statement.
\n\n\n\nSubtract COGS from the total revenue to calculate the gross profit. This step provides insight into the business’s ability to manage production and operational costs effectively.
\n\n\n\nNext, subtract operating expenses from the gross profit to determine the operating income. This figure shows how well the business is performing before taxes and other non-operating costs are taken into account.
\n\n\n\nFinally, taxes, interest, and other non-operating expenses are accounted for to calculate the net income. This is the final figure that shows whether the business is profitable or not.
\n\n\n\nFor small businesses, an income statement is much more than a financial report. It is a tool that provides a clear picture of profitability, highlights areas where costs can be reduced, and helps businesses make data-driven decisions. Regularly reviewing income statements can help small business owners:
\n\n\n\nUnderstanding your small business income statement is essential for making informed decisions, attracting investors, and managing profitability. Whether you are preparing for funding or looking to optimize your operations, having a clear grasp of your financials is crucial.
\n\n\n\nModeliks can simplify the process with our comprehensive financial planning tools, helping you create professional income statements and reports effortlessly. Ready to take control of your business finances?
\n\n\n\nSign up for Modeliks today and streamline your financial planning for success.
\n","slug":"income-statement-for-small-business","date":"2024-09-18T11:17:03","categories":{"nodes":[{"id":"dGVybToxMQ==","name":"Business Plans"}]},"mainCategory":{"mainCategory":["business-plans"],"videoHeader":null},"tags":{"nodes":[{"name":"business planning"},{"name":"financial modeling"},{"name":"small business"}]},"featuredImage":{"node":{"id":"cG9zdDozMzA3","sourceUrl":"/images/cms/small-business-income-statement.jpg","altText":"Modeliks Guide how to create and understand an income statement for small business, helping owners track revenue, expenses, and profitability."}},"seo":{"metaDesc":"Learn how to create an income statement for small business. Understand revenues, expenses, and profits to manage your finances effectively."},"modified":"2024-09-18T11:17:03","related":[{"id":"cG9zdDoxMDQxNQ==","title":"What is a Variance Report?","content":"\nA variance report is a financial document that compares actual performance against planned or budgeted figures. It highlights differences (variances) between expected and actual results, helping businesses identify areas where they are overperforming or underperforming. These reports are commonly used in financial management, project management, and operational planning.
\n\n\n\nVariances in a report can be classified into:
\n\n\n\nA variance report is a crucial tool for analyzing financial performance, improving budgeting accuracy, and making strategic decisions.
\n\n\n\nVariance reports allow businesses to track deviations from their budget, helping them stay on top of their financial plans and prevent overspending.
\n\n\n\nBy analyzing variances, businesses can make informed adjustments to their financial strategies, resource allocations, and operational processes.
\n\n\n\nSignificant variances can signal inefficiencies in production, procurement, or sales, prompting businesses to investigate and optimize their operations.
\n\n\n\nHistorical variance reports help businesses refine their financial projections and make more accurate forecasts.
\n\n\n\nBusinesses can identify cost overruns and take corrective action to control expenses and enhance profitability.
\n\n\n\nBy comparing actual results to expected outcomes, variance reports hold departments and individuals accountable for their financial and operational performance.
\n\n\n\nUnderstanding financial and operational variances allows businesses to identify potential risks and implement preventive measures before they escalate.
\n\n\n\nA variance report provides a clear picture of a company’s financial health by comparing budgeted vs. actual results.
\n\n\n\nIt highlights unexpected expenses and cost overruns, allowing businesses to take corrective measures.
\n\n\n\nBy tracking sales variances, businesses can determine if revenue is growing as expected or if adjustments are needed.
\n\n\n\nVariance reports provide valuable data for future business planning and strategy adjustments.
\n\n\n\nDepartments and employees can be held accountable for meeting financial and operational targets.
\n\n\n\nReal-time variance analysis helps managers make quick, data-driven decisions to optimize performance.
\n\n\n\nUnforeseen variances can indicate changes in market trends, economic conditions, or customer behavior, allowing businesses to adapt accordingly.
\n\n\n\nVariance reports are essential tools for financial analysis, cost control, and strategic decision-making. By regularly monitoring variances, businesses can improve their financial accuracy, enhance operational efficiency, and ensure sustainable growth. Whether used for budgeting, forecasting, or performance evaluation, variance reports help businesses stay competitive and financially stable.
\n\n\n\nMake confident decisions with Modeliks. Plan, manage, fundraise and grow your business.
\n\n\n\nAuthor:
Modeliks Team
A Certified Management Accountant (CMA) is a professional designation awarded to individuals who have demonstrated expertise in financial management, strategic decision-making, and performance management. The CMA certification is issued by the Institute of Management Accountants (IMA) and is recognized globally as a mark of excellence in management accounting.
\n\n\n\nCMAs possess in-depth knowledge of financial planning, analysis, risk management, internal controls, and corporate finance. Unlike Certified Public Accountants (CPAs), who focus primarily on financial reporting and compliance, CMAs specialize in using financial data to guide business strategy and improve overall organizational performance.
\n\n\n\nTo earn the CMA designation, candidates must meet specific educational and experience requirements, pass a rigorous two-part exam covering financial planning and analysis, and adhere to ethical standards set by the IMA. CMAs play a crucial role in helping businesses optimize financial operations and achieve long-term success.
\n\n\n\nCMAs provide valuable financial insights that help businesses make informed strategic decisions, ensuring sustainable growth and profitability.
\n\n\n\nWith expertise in cost control and budgeting, CMAs help organizations optimize resource allocation, minimize waste, and improve operational efficiency.
\n\n\n\nCMAs play a critical role in identifying financial risks, implementing internal controls, and ensuring compliance with financial regulations, reducing the likelihood of fraud or financial mismanagement.
\n\n\n\nBy analyzing financial data and key performance indicators (KPIs), CMAs assist businesses in setting realistic goals, measuring progress, and improving overall performance.
\n\n\n\nBusinesses considering mergers, acquisitions, or major investments rely on CMAs to conduct financial analysis, assess risks, and ensure informed decision-making.
\n\n\n\nCMAs develop and maintain financial forecasts, ensuring businesses have a clear roadmap for future growth and financial stability.
\n\n\n\nCMAs ensure that businesses adhere to financial regulations, ethical standards, and corporate governance best practices, fostering transparency and accountability.
\n\n\n\nCMAs prepare financial forecasts, conduct variance analysis, and provide insights into business trends, helping organizations plan effectively for the future.
\n\n\n\nThey assess production costs, overhead expenses, and pricing strategies to maximize profitability while maintaining cost efficiency.
\n\n\n\nCMAs assist executives and business owners in making data-driven decisions, evaluating investment opportunities, and formulating growth strategies.
\n\n\n\nBy implementing robust risk management practices and internal controls, CMAs help businesses safeguard assets and prevent financial fraud.
\n\n\n\nThey develop budgets, financial models, and projections to ensure businesses have a clear financial direction and avoid unexpected cash flow issues.
\n\n\n\nCMAs track financial performance through KPIs and suggest improvements to enhance efficiency, productivity, and profitability.
\n\n\n\nThey ensure that businesses comply with accounting standards, tax laws, and ethical guidelines, reducing the risk of legal and financial penalties.
\n\n\n\nWith the increasing reliance on digital tools and analytics, CMAs leverage financial software and data analytics to enhance decision-making and streamline financial operations.
\n\n\n\nA Certified Management Accountant (CMA) is an essential asset for any business seeking financial stability, strategic growth, and operational efficiency. With expertise in financial planning, cost management, risk assessment, and strategic decision-making, CMAs help organizations optimize financial performance and achieve long-term success. Whether you’re a small business owner or part of a large corporation, having a CMA on your team can provide the financial leadership needed to navigate today’s dynamic business landscape.
\n\n\n\nMake confident decisions with Modeliks. Plan, manage, fundraise and grow your business.
\n\n\n\nAuthor:
Modeliks Team
Enloop has been a go-to business planning software for many entrepreneurs, offering an automated way to create business plans with a focus on performance scoring. However, it might not meet the specific needs of every business. Fortunately, there are other Enloop alternatives that provide a broader range of features suited for different industries and business types.
\n\n\n\nBusiness planning software is essential for turning ideas into actionable plans in hours. These tools help streamline the process of creating polished, investor-ready plans, automate financial forecasting, and provide insights for tracking performance and making confident decisions. Whether you’re a startup or an established business, using business planning software ensures your plans are well-aligned with market standards.
\n\n\n\nWhile Enloop offers basic performance scoring and automated planning, it does come with some limitations:
\n\n\n\nBottom line: If you’re looking for a tool with stronger financial planning, advanced tracking features, and industry-specific financial models, then it’s time to explore Enloop alternatives.
\n\n\n\nHere are the top alternatives to Enloop and why they might be better choice:
\n\n\n\nBelow is a detailed assessment of each Enloop alternative. I used the following criteria for evaluating of each alternative: ease of use, quality of business plan output, financial planning capabilities, performance tracking features, integrations, investor reporting capabilities and pricing. Detailed explanation of each criteria is shown in the table below.
\n\n\n\nPositives:
\n\n\n\nNegatives:
\n\n\n\nPositives:
\n\n\n\nNegatives:
\n\n\n\nPositives:
\n\n\n\nNegatives:
\n\n\n\nPositives:
\n\n\n\nNegatives:
\n\n\n\nPositives:
\n\n\n\nNegatives:
\n\n\n\nPositives:
\n\n\n\nNegatives:
\n\n\n\nWhile Enloop remains a popular option for business planning, its limitations in financial planning, performance tracking, and customization make it less suitable for businesses that need more advanced features. Modeliks stands out with its AI-driven approach, financial planning depth, and investor reporting features. Upmetrics, Bizplan, and Cuttles offer solutions that are affordable and user-friendly, while IdeaBuddy excels at quickly validating business ideas.
\n\n\n\nThe best choice for your business depends on your specific needs, budget, and planning goals. Exploring these alternatives will help you find the right tool to build a more effective and tailored business plan.
\n","slug":"enloopalternatives","date":"2025-02-27T12:33:09","categories":{"nodes":[{"id":"dGVybToxMQ==","name":"Business Plans"},{"id":"dGVybToxNA==","name":"Financial Forecast"},{"id":"dGVybToxMg==","name":"Pitch Decks"},{"id":"dGVybToxMw==","name":"Reports & Dashboards"}]},"mainCategory":{"mainCategory":["business-plans"],"videoHeader":null},"tags":{"nodes":[{"name":"ai"},{"name":"ai business planning"},{"name":"business planning"},{"name":"enloop"},{"name":"Enloop Alternatives"},{"name":"financial forecasting"},{"name":"financial modeling"},{"name":"financial reporting"},{"name":"investor report"},{"name":"modeliks"}]},"featuredImage":{"node":{"id":"cG9zdDoxMDMzMg==","sourceUrl":"/images/cms/getty-images-biSzvFsO1WA-unsplash.jpg","altText":"Enloop Alternatives"}},"seo":{"metaDesc":"Which are the top Enloop business planning software alternatives? Learn more about each of their features that make them different."},"modified":"2025-02-27T12:33:14","related":null}]}2:["$","$L8",null,{"post":"$9"}] 7:[["$","meta","0",{"name":"viewport","content":"width=device-width, initial-scale=1"}],["$","meta","1",{"charSet":"utf-8"}],["$","title","2",{"children":"Modeliks | What is an Income Statement for Small Business?"}],["$","meta","3",{"name":"description","content":"Learn how to create an income statement for small business. Understand revenues, expenses, and profits to manage your finances effectively."}],["$","link","4",{"rel":"canonical","href":"https://www.modeliks.com/resources/business-plans/income-statement-for-small-business"}],["$","meta","5",{"property":"og:title","content":"Modeliks | What is an Income Statement for Small Business?"}],["$","meta","6",{"property":"og:description","content":"Learn how to create an income statement for small business. Understand revenues, expenses, and profits to manage your finances effectively."}],["$","meta","7",{"property":"og:url","content":"https://www.modeliks.com/resources/business-plans/income-statement-for-small-business"}],["$","meta","8",{"property":"og:site_name","content":"Modeliks"}],["$","meta","9",{"property":"og:locale","content":"en_US"}],["$","meta","10",{"property":"og:type","content":"article"}],["$","meta","11",{"name":"twitter:card","content":"summary"}],["$","meta","12",{"name":"twitter:title","content":"Modeliks | What is an Income Statement for Small Business?"}],["$","meta","13",{"name":"twitter:description","content":"Learn how to create an income statement for small business. Understand revenues, expenses, and profits to manage your finances effectively."}],["$","link","14",{"rel":"icon","href":"/favicon.ico","type":"image/x-icon","sizes":"16x16"}]] 1:null