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The art of costing Profit and Loss (P&L)

The art of costing Profit and Loss (P&L). A personal view into tools and methodologies. Tiago Lopes, Industrial Engineer/Executive MBA, May 2014. Profit and Loss account (P&L). An income statement (US English) or profit and loss account (UK English)

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The art of costing Profit and Loss (P&L)

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  1. The art of costingProfit and Loss (P&L) A personal view into tools and methodologies Tiago Lopes, Industrial Engineer/Executive MBA, May 2014

  2. Profit and Loss account (P&L) • An income statement (US English) or profit and loss account (UK English) • Is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period. • It indicates how the revenues are transformed into the net income • It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues • The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported - From Wikipedia, the free encyclopedia

  3. Company’s mission • Any company must have objectives and a mission for its existence: • Profit, charity, regional development, promotion of a technology, introduce new services, etc. • Once understood the objectives, aligned by the mission, it is possible to define milestones and pilot the company Resources management to achieve the goal fulfilling the mission

  4. Resources Management E.g. Making apple preserve We need HR Ingredients Instructions Equipments Facilities And as result we’ll have apple preserve waste + + + + +

  5. A company’s sustainability • Money would be the primordial resource allowing to start a project and keep it running Operations Financer Shareholder Management Product Opportunities Results Sales Risk

  6. Profit and Loss statement • Sales $$$$$ • Cost of supplies - • Direct Labor - • Gross Margin $$$$ • Operational costs - • Indirect Labor - • Variable Margin $$$ • Amortizations / Depreciations - • Financial costs/results - • Margin before taxes $$ • Taxes - • Payment of dividends - • Profit (+/-) $

  7. Other more specific examples Internet random images

  8. P&L as a continuous improvement tool • Recycling to work on waste management • Continuous improvement to work on the process • Technical productivity to apply on to the product or recipe • Investments to apply in HR or production means • Or other projects

  9. Conclusion Dear readers, This is a basic presentation and for sure there are other representations and layouts – as my goal is to introduce the concept and the easiness of reading would mark you more than the technical complexity so that you retain the essential on the theme As always, your feedback would be appreciated as it is the way to improve Best regards, Tiago

  10. Who am I? • I’m an Industrial Engineer and exec. MBA • Experienced in • Management: Plant Management, Business management, Project Management, VA/VE and other special projects • Operations: Supply chain, Industrial footpath & Green field operations, Lean process installation & Ergonomics, Lean 6 Sigma continuous improvement • Finance: P&L, Cost calculation, Price target strategies • International footpath, • Passionate for sci-fi and strategy

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