After a Business is created in Hospitable, you will unlock the ability to view and manage your Reports. Within the Reports, you will discover your Profit and Loss (P&L) Statement.
The Profit and Loss (P&L) statement, often referred to as an income statement, is one of the most essential tools for understanding the financial health of your business. It provides a snapshot of how much income you are making, how much you are spending, and ultimately, how profitable your business is over a certain period of time. Whether you self-manage, manage for others, or rent a property, it is crucial that you develop and understand your P&L for personal use, reporting, and tax purposes.
What is a Profit and Loss (P&L) Statement?
A Profit and Loss statement summarizes your revenue or income and expenses over a specified timeframe. It helps you understand:
Your income and costs related to your business
Whether your business is profitable
How your income and expenses change over time
What decisions should be made relating to pricing, budgeting, and growing or scaling your business
What is included in your Profit and Loss (P&L) Statement?
Revenue:
Revenue, often referred to as income, represents income earned from sales and services provided. For each business model, there is recommended Chart of Accounts that would likely be utilized for business transactions for revenue and income.
Categories:
Accommodations from booking platforms (not including discounts)
Reservation fees such as cleaning, extra guest fees, linen fees, pet fees, resort fees, and community fees
Property management commission and markup fees
Pass-through taxes for sales and lodging and occupancy
Upsell revenue by adding additional services or goods for a guest
After the revenue is added for a sum, this is considered your Gross Profit. Your gross profit is the total amount of income and revenue from operating your rental prior to subtracting expenses or deductions.
Expenses:
Expenses, often referred to as deductions, represent costs incurred as part of your business. For each business model, there is recommended Chart of Accounts that would likely be utilized for business transactions for revenue and income. These expenses can either be classified as:
Variable: the amount of the expense changes month-to-month or is ad-hoc (as needed)
Fixed: the amount of the expense is consistent month-to-month with little to no change in the value
Categories:
Advertising and marketing
Cleaning services
Continuing education
Insurance
Licenses
Maintenance and repairs
Mortgage
Professional services (accounting and legal fees)
Software, applications, and subscriptions
Supplies (cleaning, house, office)
Taxes (sales, lodging and occupancy, property and real estate, payroll)
Utilities (electricity, water, gas)
Refer to the following articles that provide specific insight into each of the recommended income and expense categories for your business model:
Net Profit or Loss:
Net profit or loss is considered the actual amount of profit (or loss) that you made for a given period (monthly, quarterly, annually, or custom) once expenses have been subtracted and deducted. If your amount is positive, you had a net profit for the period, and if your amount is negative, you had a net loss for the period. This allows you to report if your business is making money or costing money.
Gross Revenue (Income) - Expenses (Variable and Fixed) = Net Profit (or Loss)
Why does your Profit and Loss Statement matter?
Your Profit and Loss Statement is a powerful tool that gives you insight into the financial health of your business. Whether you manage one rental or a growing portfolio, your P&L helps you make better decisions, stay organized, and prepare for tax season with confidence.
Understand Your Profitability
Your Profit and Loss Statement shows you how much money you are earning on a gross basis, how much you are spending, and how much you are actually earning after your earnings and deductions are included.
This allows you to:
Determine if there are areas within your business you are overspending
Adjust the prices you charge or reduce your costs
Identify trends in your income and expenses over a period of time
Make Informed Decisions
Your Profit and Loss Statement provides data-driven metrics to determine how your business is performing and allows you to make informed decisions for:
Future growth and scaling of your business
Budgeting and preparation for trends in the market
Understanding if you have the current financial capacity to enhance or develop your business
Stay Organized and Save Time
By keeping track of your bookkeeping in a Profit and Loss Statement, you are saving yourself time when you need to create reports, provide your income or revenue to apply for business credits or loans, or looking to enhance your business through promoting to investors or potential business partners. Keeping a regularly updated P&L saves hours of time attempting to record transactions in a single moment. This allows you to be up-to-date on your current financials in any given moment.
Tax Reporting
Your Profit and Loss Statement is the key component when approaching tax season and tax reporting. A P&L consolidates your income and expense transactions in one single statement or file to accurately report your earnings for the given tax year. The P&L helps by:
Tracking deductible expenses from your earned income
Organizing your records to reduce the chance of errors in reporting and staying compliant with taxing and regulatory agencies and jurisdictions
Supporting tax-saving strategies to enhance your taxable income by making smart year-end decisions related to purchases and savings