Understanding Your Profit and Loss Statement
Learn to read the most powerful financial report in your business.
Your Profit and Loss Statement—also called a P&L or income statement—is one of the most critical tools for understanding your business’s financial health. But for many small business owners, it’s a document they only glance at during tax season (if at all). Let’s change that.
At DBR Bookkeeping, we believe that small business owners—especially service providers, creatives, and coaches in Northwest Arkansas—deserve clarity. The P&L is your monthly reality check. Here’s how to make it work for you.
What is a Profit and Loss Statement?
A Profit and Loss Statement is a summary of your income and expenses over a specific period, typically monthly, quarterly, or annually. It helps answer one core question:
Is your business making money—or losing it?
It breaks down:
Revenue (what you earned)
Cost of Goods Sold (COGS) (direct costs to deliver your service or product)
Operating Expenses (overhead, marketing, tools, etc.)
Net Profit or Loss (what’s left over—or not)
Why It Matters
If you’re not reviewing your P&L regularly, you’re flying blind. Here’s what it helps you understand:
Are you charging enough for your services?
Are your operating expenses eating into profits?
Are certain months consistently better or worse?
Can you afford to hire or invest in growth?
It’s not just about taxes. It’s about decision-making.
How to Use Your P&L for Better Decisions
Track Trends Over Time
Compare month-to-month or year-over-year to see patterns in income and expenses.Spot Leaks in Spending
Are subscriptions or software costs creeping up? Review and trim regularly.Plan for Profit
If your net profit is consistently low, you may need to raise prices or cut costs.Work with a Bookkeeper
A P&L is only as good as the data in it. Clean, categorized bookkeeping makes it accurate and actionable.
FAQ: Profit and Loss Statement Basics
Q: How often should I look at my P&L?
A: Monthly. It’s your financial pulse.
Q: What’s the difference between gross profit and net profit?
A: Gross profit is income minus direct costs (COGS). Net profit is what’s left after all expenses.
Q: Can QuickBooks generate my P&L?
A: Yes. QuickBooks Online can generate real-time P&Ls automatically—if your books are set up properly.
Q: I don’t understand my P&L—what should I do?
A: Book a call with a professional who can walk you through it in plain English.
Ready to Understand Your Numbers?
Let’s get your Profit and Loss Statement working for you, not just your CPA.
📅 Book a free call with Dr. Bryan Raya today and get a clear breakdown of your business finances.
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