If you run a business, it’s important to know whether you're making money or losing it. One of the best ways to see that is by using a P&L statement.

P&L stands for Profit and Loss. It’s a report that shows how much money your business made, how much it spent, and what’s left over.

Let’s break it down in a way that’s easy to understand.

What Is a Profit and Loss Statement?

A Profit and Loss statement (also called a P&L or income statement) is a financial report. It shows:

• Money in (revenue)
• Money out (expenses)
• Profit (what’s left after you pay all your costs)

You can make a P&L for a week, a month, a quarter, or a year

Why Is a P&L Statement Important?

Here are three big reasons:

1. It shows your real profit
   You might have money in the bank, but that doesn’t mean you’re making a profit. A P&L shows you the full picture.
2. It helps you make smarter decisions
   When you see where your money is going, you can cut back on things you don’t need or spend more where it matters.
3. It’s needed for taxes, loans, and investors
   If you want a loan or to bring in investors, they’ll almost always ask for your Profit and Loss statement.

What’s Inside a P&L?

Here’s what a simple P&L would show at a high level:

Revenue is all the money your business earns.
Cost of Goods Sold (COGS) is what it costs to make or deliver what you sell.
Expenses include rent, software, payroll, or advertising.
Net Profit is what’s left after all your costs and expenses.

How to Read Your P&L

Here are some easy tips:

• Check it every month (not just at tax time).
• Watch for trends—are your sales going up or down?
• Look at your expenses—what can you cut?
• Compare this month to last month or last year.

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How to Make a P&L Statement

You don’t need to be an accountant to create a P&L. Here’s how you can do it:

• Use software like QuickBooks, Xero, or Wave
• Download a free spreadsheet template
• Ask your bookkeeper or CFO to create one

Final Thoughts

Your Profit and Loss statement helps you understand your business better. It shows how much you’re making, how much you’re spending, and where your money is going.

If you check your P&L regularly, you’ll make better decisions and grow faster.

‍Need help with your P&L?

‍I help small business owners understand their numbers and take control of their money. Fill out the form below to get a FREE analysis of your P&L.