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

The art of costingProfit and Loss (P&L)

Tiago Lopes, Industrial Engineer/Executive MBA, May 2014

A personal view into tools and methodologies

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

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 ManagementE.g. Making apple preserveWe need

HR Ingredients Instructions Equipments Facilities

And as result we’ll have

apple preserve waste

+ ++ +

+

• Money would be the primordial resource allowing to start a project and keep it running

A company’s sustainability

Financer

ShareholderManagement

Operations

Product

Sales

ResultsOpportunities

Risk

• 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 (+/-) $

Profit and Loss statement

Other more specific examples

Internet random images

•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

P&L as a continuous improvement tool

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

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