The Institute's Leading Edge

190 -Ask Me Anything: What Your P&L Is Really Telling You: Reading Your P&L Without the BS February 04, 2026 - 01:02:24   Show Summary: Cecil Bullard and Eric Joern break down why most shop P&Ls are confusing unreliable and overloaded with noise. They explain how inconsistent accounting practices distort margins and decision making, and why clean consistent structure matters more than perfect numbers. The discussion covers matching income to costs using accrual principles reducing unnecessary detail and using trends to spot real problems. This episode gives shop owners a clearer way to read their financials with confidence and control.   Host(s): Cecil Bullard, Founder of The Institute   Guest: Eric Joern, CPA, CM&AA, AAM, KAIZEN CPAs + Advisors Show Highlights: [00:00:02] – Why profit and loss statements matter for shop owners [00:01:02] – Accurate P&Ls are rare and usually misunderstood [00:02:22] – Accounting opinions create confusion and inconsistent reporting [00:05:33] – Frankenstein P&Ls make performance comparisons impossible [00:06:49] – Structure income and costs to clearly see gross profit [00:10:33] – Long P&Ls cause decision fatigue and hide key issues [00:14:15] – Misclassified wages distort margins and financial reality [00:19:30] – Inventory purchases should not destroy monthly profitability [00:26:19] – Every part and car needs accountability to prevent losses [00:45:54] – Clean current financials matter more than fixing the past   In every business journey, there are defining moments or challenges that build resilience and milestones that fuel growth. We’d love to hear about yours! What lessons, breakthroughs, or pivotal experiences have shaped your path in the automotive industry? Share your story with us at info@wearetheinstitute.com, and you might be featured in an upcoming episode.   👉 Unlock the full experience - watch the full webinar on YouTube: https://youtu.be/J-qbi8HoMLE Don’t miss exclusive insights, expert takeaways, and real talk you won’t hear anywhere else. Hit Subscribe, drop a comment, and share it with someone who needs to hear this!   Links & Resources:  Want to learn more? Click Here Want a complimentary business health report? Click Here See The Institute's events list: Click Here Want access to our online classes? Click Here ________________________________________ Episode Transcript Disclaimer This transcript was generated using artificial intelligence and may contain errors. If you notice any inaccuracies, please contact us at marketing@wearetheinstitute.com.   Episode Transcript:   00:00:02:02 - 00:00:13:11 Cecil Bullard Welcome to ask Me Anything. Today I have, with me, Eric Joern. If I, if I mispronounced it. Eric, just correct me. 00:00:13:14 - 00:00:14:12 Eric Joern You got it. 00:00:14:14 - 00:00:42:25 Cecil Bullard From Kaizen, CPA. They do. Accounting. And, you have an awful lot of our clients. Yep. Which many of those we have recommended because accounting is so bad out there. So. So you guys do a good job. Yeah. So today we're going to we're going to start out kind of by talking about profit loss, profit loss statements and why they might be important. 00:00:42:25 - 00:01:02:05 Cecil Bullard And, of course, if you're out there, and you would like to ask a question or if you have any kind of a question at all, you want to do that, please put it in the comments. Rawley will be taking care of that for us. And, making sure we get those questions so we can get him answer. 00:01:02:07 - 00:01:26:20 Cecil Bullard Let me let me start out here, Eric. I always make this kind of comment I have seen, I don't know, 10,000 pals in my life. And, and, I can count on one hand the number of pals that I've seen that are actually accurate. Well done. And give us the information we need, at least in the beginning. 00:01:26:22 - 00:01:39:26 Cecil Bullard Yeah. What? Why? Why is it so? I don't know, why is it so bad out there where there's so much inaccuracy and so much confusion around the profit and loss statement? 00:01:39:28 - 00:02:01:10 Eric Joern Yeah. You know, sometimes sometimes we have that we have that same question. But when we think about it right, there's a lot of moving pieces to generate a good financial statement. So first you have to have the right systems and processes set up. Then you have to have a you have the owner side or whoever's getting the data, collecting the data, doing the things right. 00:02:01:10 - 00:02:21:29 Eric Joern So is my shop management system accurate? How am I paying my bills? How am I running payroll? Am I using the right payroll software? Are those things happening correctly? When I'm collecting things right, do I or how often do I go to the bank and deposit cash and checks and do things like that? There's all these input factors that go into an accounting hub. 00:02:22:01 - 00:02:48:18 Eric Joern And then across that there are all sorts of different theories on accounting, right. Accounting really isn't black and white, right. Our job is to show economic reality for that business. So we need to show what actually is happening. Well that's opinionated right. And that's why, you know, the institute has a specific way that they like to look at a PNL versus maybe, you know, Joe Schmo, CPA on the street. 00:02:48:19 - 00:02:55:08 Eric Joern Right. And and probably their goal is what's the easiest way for me to file tax return? And, you know. 00:02:55:08 - 00:03:19:01 Cecil Bullard You know that. Oh go ahead. I think that that. So first of all, you're making it seem like it's very complicated, very hard. I don't I don't see it that way myself. So that that might be somewhere where I disagree with you. My my accountant. You know, we have a CFO in the company. And, you know, if we had an outside of B, you guys. 00:03:19:03 - 00:03:55:26 Cecil Bullard But, they are tied into our bank accounts. So they see payments coming and going. They're tied into our credit cards, so they see payments coming and going. So all deposits are kind of recorded through the bank account. All, all outgoing moneys go through one account or another. And as well as credit. And then once we, once we determine what the PNL needs to be set up like, and we create, what we chart of accounts for that. 00:03:55:28 - 00:04:17:08 Cecil Bullard Exactly. Then it it seems to be like it's not overly complicated at that point. Right? And I would agree with you that I don't think I would disagree in the, in the fact that the numbers are going to say what the numbers say. I don't I don't think that we can like say, okay, well, that that number is not what I want. 00:04:17:08 - 00:04:46:12 Cecil Bullard So I'm going to go see if I can find another number. But, but certainly the institute likes to look at the finances differently than maybe, some of it's running, I don't know, a shoe store would look at their finances. And so that is probably challenging for you guys in the fact that you have, you know, different types of companies you work with that, you know, might look a little different than they might be for automotive. 00:04:46:15 - 00:05:05:29 Eric Joern Yeah. And there's a lot of noise, right? So, so if you go out, you know, you go out into the Facebook groups and say, how should I have my pal there going to somebody's going to give them one direction and then they're going to go to their accountant, they're going to get a different direction, and then they're going to go to the institute or their coaching company, and they're going to get a different direction. 00:05:06:01 - 00:05:16:26 Eric Joern And all that noise makes it really hard for them to, you know, what do I exactly do? Right. I, I need services or cost of goods. 00:05:16:28 - 00:05:18:00 Cecil Bullard At the. 00:05:18:02 - 00:05:19:19 Eric Joern Road. My wage. 00:05:19:21 - 00:05:20:22 Cecil Bullard Is. 00:05:20:24 - 00:05:26:20 Eric Joern Right. So I need to set up like this or that. We see. 00:05:26:20 - 00:05:33:00 Cecil Bullard A lot of that noise that is causing issues. And so we actually see sometimes, when their financial statements. 00:05:33:04 - 00:05:56:01 Eric Joern Almost Frankenstein, I'd say, meaning they brought in areas from different, different avenues and they put it all together. They said, oh, I like this idea. I'm going to implement this. I like this idea. I'm going to implement it this way. And then half of it's right here and half of it's here. And one of the things that we always say is, I'd rather have a financial statement that's consistently wrong than sometimes right. 00:05:56:03 - 00:06:14:16 Eric Joern And I know that's a weird comment to make, but think about it. We're always measuring performance based on relativity, right? Did I improve from this from this prior measurement point? Well, if I'm constantly changing how I measure, I'm never going to have a relative measurement. 00:06:14:19 - 00:06:49:04 Cecil Bullard But that's also probably one of the more difficult things for you guys is that, you know, whenever we we've changed accounting a couple of times in our business, you know, in the unknown, 15 years or so we've been in business, we've gone through, I think we're on our third different accounting. And every time it's like, well, we want to use QuickBooks and I want to use sage, and, and so we, we want to reset up and, and so if I'm not set up correctly in the first place, then I come in and I go, okay, I want to get set up this way. 00:06:49:06 - 00:07:23:29 Cecil Bullard I might be getting different numbers are looking at different numbers than I had previously. Which got a good challenge, right? Absolutely. At the Institute for automotive, the way that I learned it was I want to have, as my income, any income source that I have that's over, say, 2% of what I do in business. So if I'm if I'm selling, if 10% of my business is tires, I want to have a tire income separa