Every year, thousands of Australian businesses pore over income statements, chasing clarity in a sea of numbers. But what if you could instantly see how every dollar of revenue is spent, compare apples with apples (regardless of business size), and spot financial trends before they hit the bottom line? Enter the common size income statement—a powerful tool that’s gaining traction in boardrooms, start-ups, and investment committees across Australia in 2025.
What is a Common Size Income Statement?
A common size income statement takes the traditional profit and loss report and expresses every line item as a percentage of total sales or revenue. This isn’t just a mathematical exercise; it’s a game-changer for financial analysis. Instead of being bogged down by big numbers, you see the relative weight of each expense and revenue source, making it easier to compare companies of different sizes, track internal trends, and benchmark against industry norms.
- Revenue is always 100%. Every other item—cost of goods sold (COGS), gross profit, operating expenses, interest, and net profit—is shown as a percentage of revenue.
- Trends leap off the page. For example, if marketing spend creeps from 8% to 12% of sales over two years, that’s immediately visible—regardless of whether revenue doubled or halved.
- Benchmarking is simplified. Whether you’re comparing an ASX-listed retailer to a local café, or an Australian tech start-up to a US peer, common size statements level the playing field.
How to Prepare and Read a Common Size Income Statement
Creating a common size income statement is refreshingly simple:
- Start with your standard income statement for the year (or quarter).
- Divide each line item by total revenue and multiply by 100 to get a percentage.
- Review the statement for patterns, outliers, and year-over-year changes.
Here’s a quick example, using hypothetical 2025 numbers for an Australian e-commerce retailer:
| Item | $ Amount | Common Size (%) |
|---|---|---|
| Revenue | $2,000,000 | 100% |
| COGS | $1,200,000 | 60% |
| Gross Profit | $800,000 | 40% |
| Operating Expenses | $500,000 | 25% |
| Interest | $30,000 | 1.5% |
| Tax | $81,000 | 4.05% |
| Net Profit | $189,000 | 9.45% |
Notice how much easier it is to compare this company’s performance to another, regardless of revenue size?
Why Common Size Statements Matter More Than Ever in 2025
The 2025 Australian business landscape is shaped by rapid digital transformation, inflationary pressures, and tighter competition. Against this backdrop, common size income statements are proving invaluable for several reasons:
- Policy Shifts: With the ATO’s 2025 push for greater financial transparency and digital reporting, businesses are encouraged to adopt standardised financial formats. Common size statements fit the bill perfectly, helping firms align with compliance and reporting best practices.
- Investor Scrutiny: In a climate where investors demand granular insight, common size statements help founders and CFOs tell a compelling, comparable story—vital for capital raising or M&A activity.
- Sector Benchmarking: Government agencies, industry associations, and lenders increasingly publish sector averages in common size format, making it easier to spot if your payroll, rent, or marketing spend is above or below the pack.
- Internal Decision-Making: Rapidly growing businesses often see expenses balloon. A common size view helps management identify cost creep or efficiency gains, and set more informed targets for the year ahead.
Real-World Example: Benchmarking an Aussie Hospitality Group
Consider a hospitality group operating several Sydney venues. In 2024, their food costs sat at 34% of revenue. In 2025, with supply chain disruptions easing and new supplier contracts, this dropped to 31%. Meanwhile, wage costs crept up from 28% to 30% as a result of minimum wage increases legislated in July 2025. With a common size income statement, management could see these shifts immediately—and compare them to industry averages published by the Restaurant & Catering Association.
Limitations to Keep in Mind
While common size statements are a powerful tool, they’re not a silver bullet. They don’t explain why a percentage has shifted—just that it has. For deeper analysis, you’ll need to dig into operational drivers, competitive dynamics, or one-off events. But as a starting point for discussion, goal-setting, or performance review, few tools are as effective or as widely adopted in 2025.
Getting Started
Whether you’re a business owner, investor, or finance professional, adding common size income statements to your analytical toolkit can unlock sharper insights and smarter decisions. Most cloud accounting platforms in Australia (think Xero, MYOB, or QuickBooks) now include this feature as standard, and it’s easy to export for further analysis or board presentations.
