Last month, we took a deep dive into the revenue portion of the profit and loss statement (P&L), but that is only half the equation (pun intended).  As discussed, revenue is always where any financial analysis should begin because business owners and CFOs need to know how much money is coming in before they can start looking elsewhere. But a close second is then understanding how much money is going out of the business.

It’s not uncommon that a business owner thinks they have an understanding of their financials because they vaguely know the numbers on their profit and loss statement (P&L). And while, yes, that’s a great start, it’s not enough to truly understand what’s behind the numbers generated neatly on that common—and crucial—financial report. How did the numbers get there? What do they really mean?

Being proactive is one of the fundamental keys in business. “Acting in anticipation of future problems, needs, or changes,” as the definition of the term tells us, is crucial for any business owner. We shouldn’t sit idly by and wait for something to occur in order to prepare an appropriate (or at stressful times, an inappropriate) response. While those situations may be unavoidable from time to time, most often, they’re not … when we’re appropriately anticipating them.