Analyze P&L using the Recurring vs. Non Recurring Method

What This Video Is About

This video is about creating a variance analysis based on recurring and non-recurring costs to understand the business from two perspectives: business drivers for changing costs and accounting changes or errors. The instructor, Bill Hannah, uses an example of Cloud Ledger Inc., a software company, to demonstrate the analysis.

Major Ideas Discussed

• Classifying costs as recurring or non-recurring, with recurring costs including salaries, rent, and software licenses, and non-recurring costs including recruiting expenses, conferences, and professional fees.
• Creating a summary tab in Excel to summarize recurring and non-recurring costs using a filter formula.
• Analyzing the numbers to identify fluctuations or discrepancies, including calculating variance between Q1 and Q2 for each line item.
• Investigating fluctuations or discrepancies, such as changes in hosting and infrastructure costs, customer support salaries, research and development salaries, and accounting errors.
• The importance of breaking down the P&L into recurring and non-recurring costs to understand the business and identify optimization efforts, accounting mistakes, and areas for improvement.

What to Watch Next

The speaker suggests monitoring optimization efforts, accounting mistakes, and areas for improvement, and practicing the concepts learned using the Excel file provided.