I’ve been a freelance writer and editor years longer than I’ve had proper accounting software. (A quick hat tip to Freshbooks for making the switch from home-brewed spreadsheets to software not so painful.) The basics are easy (invoice! expense! bam!), and I have a brilliant freelance-friendly tax accountant. But I’m still learning a lot about the business part of my freelance business.
It’s the end of the year, so I needed to clean up expense reports. I also wanted to donate a huge pile of money to charity because I’d had a good year. I wanted to share. The profits and loss report helped me see where expenses had been categorized or entered incorrectly, then flipped back to the expenses to fix it all. Et voila! Profits!
But not much.
P&L: Practice and Learn
This is where I learned what exactly the profit and loss report reports. Sure, it tells you if you profited or lost money over the year; I knew that. But I didn’t really get the difference between my gross income, which was pretty good, with my net profit, which was paltry.
I pay myself a monthly wage, so that took a huge chunk out of the profits. And I pay for all my own travel to automotive shows and conferences, so that was a lot too. And there’s utilities, and subscriptions to tools like Merriam-Webster Unabridged online, and the few bucks I paid for contract templates with better language than the ones I’d used for years. It ate away at that net profit line in big bites and small nibbles until I had just a little pile of virtual money in bold font at the bottom of the report. Oh, I thought, this is that bottom line everyone talks about.
I was disappointed. I wasn’t going to be donating a big chunk of money after all. I was not going to make it rain up in here, or anywhere else. But I followed through with my original intent, though it was more than a bit diminished, and donated 10% of that net profit to the Malala Fund to help girls around the world achieve 12 years of education. And I’d like to do it again next year. So I’m going to pay more attention to the literal bottom line and, I hope, have a bigger pile to share in 2016.