Renzo DemartiniIn short
- Check the period, the accrual or cash basis and the business before you compare two months.
- Post the missing supplier and payroll costs, keep the original report and bridge to the comparable result.
- Read the change in operating profit only after the bridge agrees, then decide on growth.
October profit looks A$18,000 better than September. That is a headline, not yet a finding. These are sample figures.
Before the owner reads it, the report has to be comparable: the same period rules, complete costs and consistent categories. Then the real change shows.
Save the comparison settings
Same basis, same business and same tax display, saved with each export
| Setting | September | October |
|---|---|---|
| Period | 1 to 30 September 2026 | 1 to 31 October 2026 |
| Basis | Accrual | Accrual |
| Scope | One business | Same business |
| Currency and tax | A$, excluding GST | Same |
| Export kept | Version 1 | Original and corrected |
Illustrative figures, not client data.
Business Queensland says a profit and loss statement ‘shows the profitability of your business over a specific period’. Save the dates, the basis and the business beside each export, and name who owns the export so the next comparison uses the same settings.
October has an extra day. Check trading days and seasonal demand before crediting better performance. Keep a cash-basis export in its own comparison. business.gov.au also asks you to state whether figures are GST inclusive or exclusive.
Close the posting gaps
Sales agree, but A$12,000 of costs were never posted to October
| Workflow | Record checked | Finding and action |
|---|---|---|
| Sales | Dispatch log to sales ledger | A$220,000 of sales agree |
| Purchasing | Goods receipts to supplier bills | Post A$8,000 of missing costs |
| Payroll | Approved payroll to ledger | Post A$4,000 of missing costs |
| Finance | Bank and journal review | Keep the A$10,000 disposal gain, flag it |
Illustrative figures, not client data.
The first October report showed A$48,000 before interest and income tax. Posting the missing costs brings it to A$36,000. Save both versions with the journal references.
A bank reconciliation alone does not prove the costs are complete. Services Australia notes that expenses on a profit and loss statement ‘can include those incurred but not yet paid’. Ask each workflow owner to confirm the records they supplied. Compare each total with its source: sales to the dispatch log, costs to receipts and approved payroll. Business Queensland advises you to ‘reconcile all financial records each month’.
Keep categories consistent
Moving A$6,000 of direct labour changes gross profit, not total profit
| Line | September | October |
|---|---|---|
| Sales | A$200,000 | A$220,000 |
| Cost of sales | A$120,000 | A$140,000 |
| Gross profit | A$80,000 | A$80,000 |
| Operating expenses | A$50,000 | A$54,000 |
| Operating profit | A$30,000 | A$26,000 |
| Unusual disposal gain | A$0 | A$10,000 |
| Result before interest and tax | A$30,000 | A$36,000 |
October as first posted: cost of sales A$126,000, expenses A$56,000. Add an A$8,000 bill, move A$6,000 of direct labour to cost of sales, add A$4,000 of payroll.
Illustrative figures, not client data.
Cost of sales rises to A$140,000 and operating expenses fall to A$54,000. The transfer changes gross profit and leaves total profit unchanged.
Compare categories the same way in both months. AASB 101 says an entity shall ‘retain the presentation and classification of items in the financial statements from one period to the next’ unless a change is justified. Business Queensland defines operating profit as gross profit less operating expenses, before interest and tax. The management reporting article covers agreeing definitions first.
Separate owner pay and one-offs
A one-off gain stays in the ledger and comes out of the comparison only
| Item | Retained treatment | Reviewer |
|---|---|---|
| Owner pay | A$8,000 expense each month | Accountant, for this sample structure |
| Owner drawings | A$3,000 outside the profit and loss each month | Accountant, same |
| Disposal gain | A$10,000 kept in the October ledger | Finance |
| Management adjustment | Remove the gain for the comparison only | Owner |
Illustrative figures, not client data.
The accountant’s confirmation here is fictional. Ask your accountant how owner pay is treated for your structure. Settle the treatment before the first comparison, then keep it unchanged.
Keep unusual items visible. Do not rewrite the ledger to produce a preferred trend. The management comparison removes the gain openly: operating profit is A$26,000 against A$30,000.
Decide from the comparable result
Sales rose A$20,000 but comparable operating profit fell A$4,000, so hiring waits
| Check | Recorded outcome |
|---|---|
| Sales change | Up A$20,000 |
| Comparable operating profit | Down A$4,000 |
| Accountant review | Classification and owner pay accepted |
| Owner decision | Defer extra hiring until the margin is explained |
| Next evidence | Sales mix and the staffing plan |
Illustrative figures, not client data.
More sales have not produced more operating profit. Ask what changed in mix, direct costs and overheads.
A balance sheet pictures the business at a given moment, which a profit and loss statement does not. A cash flow statement, says business.gov.au, ‘tracks all the money flowing in and out of your business’. Test any hiring or equipment commitment against both.
Record the decision with both reports and the date, so next month’s comparison starts from the same rules.
What to do first
Four checks turn two reports into a comparison an owner can act on
- 01Save the settings
Period, basis, business and tax display, kept with each export.
- 02Trace sales, purchasing and payroll
Each owner confirms the records they supplied, and gaps are posted.
- 03Bridge to the comparable result
Original, corrected and comparable figures side by side.
- 04Record the owner’s decision
Keep it with both reports and name the next evidence.
Start with the two reports you compare most often.
Common questions
What is a profit and loss statement?
Business Queensland says it shows the profitability of a business over a specific period, most commonly produced monthly, quarterly or annually.
Does moving labour change total profit?
Not by itself. A reclassification changes where the cost appears, so keep the mapping from the old category to the new one.
Can reported profit fund a new hire?
Profit is not cash. Test the commitment against a dated cash forecast and the balance sheet before approving it.
Chartered Accountant (CA ANZ) and finance executive, based in Canberra. Practical AI and automation for SMEs, and adviser to owners, CEOs and boards on integration and finance.