How do you know as a dispensary manager if your store is successful? You’re open during normal business hours and you have a steady flow of customers. You also sell enough product to warrant ordering more. But all of these business essentials give you only an anecdotal assessment. Determining actual level of success requires a precise accounting of all outgoing money (expenses) and all incoming money (revenue/sales).

The P&L Statement

All businesses need a deep understanding of their financial success or shortcomings. That’s where a Profit and Loss Statement, or P&L, comes in. You may also know it as your income statement, and it tells you how much or how little you’ve earned during a particular period. The period can be a month, every three months, six months or a year. It also helps you see financial trends for your business.

A business takes in revenue and must subtract expenses. This gives “net profit,” “net revenue” or “net income.” A positive number will place the business in the “black,” having made money. “Net loss” is negative. A “red” business lost money.

As a dispensary manager, and definitely, if you are a successful dispensary manager, you’ve no doubt heard of a balance sheet. Many people new to analyzing a business from a financial perspective confuse the two. Whereas your P&L documents revenue and expenses to give a reading on your financial success or profitability, a balance sheet is a snapshot of the company’s finances at any given point in time-based on assets, liability and owners’ equity.

Why is this Important for a Dispensary Manager?

A business needs to know its Profit and Loss standing. Furthermore, as a dispensary manager, you want and need growth to stay open. Because, with a loss, you must make cuts (because of spending too much, being over budget, etc.). Additional streamlining can increase profits—and expansion may be possible. The frequency at which a business creates a P&L statement may help determine progress being made or allow you to ward off loss if a problem is noticed earlier in the operating year.

What am I Looking at?

As the dispensary manager, your job entails keeping track of sales, inventory, and the various front and back-end elements. Here is an example of what all of this information looks like in a Profit and Loss statement.

You have your business’s income from October to March in front of you. It probably has a list of revenue sources. For example, it might list daily flower sales (possibly separated by type), and product sold through your cultivation facility (if an appropriate license is held). All of this revenue is added together, and you have a dollar amount. Below revenue, you’ll find all the money you spent (your expenses). This includes labor, materials, security, utilities, depreciation (the reduction in value of tangible items, buildings, vehicles over time). But total up the expenses, too. By subtracting expenses from revenue, you’ll get another dollar amount—your net income.

Example Profit and Loss Income Statement:

Profit and Loss Statement - Pinnacle ConsultationCalculating revenue, expense and profit over a period of time gave ACME a more accurate picture of their operations. As you can see, this makes the P&L Statement a crucial financial assessment tool. The P&L example indicates that ACME has operated in the black for the past six months. It is wise to remember that this net profit figure does not represent an actual cash flow amount. The amount of cash in the bank, petty cash (on-hand cash to pay minor expenses), and expenses paid determines cash flow. Moreover, forecast future cash flow by adding expected sales, expected collections, anticipated bills, etc.

All of Your Cannabusiness Needs for the Discerning Dispensary Manager and Beyond

Whether you are selling recreational or medical marijuana, it is critical that you take every aspect of your business seriously. Without a doubt, you need to take the time to know where your money is going and how (and if) it is coming back in. Understand your profit and loss statements. Pinnacle Consultation has the expertise to help with every aspect of your business. Partner with the experts in compliance, accounting, training, operations, and more. Schedule a consultation today or call (719) 330-5301.