How to Read a Profit and Loss Statement (Without Falling Asleep)

Let’s be honest — most small business owners didn’t start their business because they love spreadsheets. You’re out there doing the work you’re great at… not dreaming about Profit & Loss reports.

But here’s the thing: your P&L (aka Profit and Loss Statement, aka Income Statement) is one of the most powerful tools you have. It tells you if your business is actually making money — or just staying busy.

So let’s break it down, real simple, no snoozing required.

What Is a Profit and Loss Statement?

It’s a summary of your income and expenses over a specific period of time — usually monthly, quarterly, or yearly.

At the end of the day, it shows:

• How much money came in

• How much went out

• What’s left over (profit or loss)

If your business was a game, this is your scoreboard.

What Timeframe Should You Look At?

Monthly is the sweet spot. You want to catch problems early — not once a year when it’s too late to fix them.

The Key Sections (Without the Jargon)

1. Revenue (a.k.a. Sales or Income)

This is the money your business brought in before expenses. If you clean houses, detail cars, or install gutters — this is what your clients paid you.

2. Cost of Goods Sold (COGS)

These are the direct costs to do the work. Think: cleaning supplies, subcontractor pay, materials, etc.

If you’re in a service business, COGS might be lower — but still important to track.

3. Gross Profit

Revenue minus COGS. This shows what you really made before paying for overhead.

Gross Profit = Revenue – COGS

4. Operating Expenses

These are the everyday costs of running your business. Examples:

• Insurance

• Advertising

• Office supplies

• Software subscriptions

• Vehicle expenses

This is where most of your money disappears without you noticing.

5. Net Profit (or Loss)

The bottom line. This is what’s left after everything — the true health check of your business.

If this number is negative, it’s time to reassess your pricing, spending, or both.

So… Why Should You Care?

Because your P&L can tell you:

• Are you charging enough?

• Are you spending too much?

• Are you on track to meet your goals?

• Can you afford to hire help, buy equipment, or take a break?

And when tax season rolls around? Having a clean P&L saves you time, stress, and possibly money.

Quick Action Plan

1. Pull your P&L for the last month

2. Highlight your top 3 biggest expenses

3. Check if your net profit is where you want it to be

4. Ask yourself: What can I tweak?

Final Thoughts

You don’t need to be an accountant to read a Profit and Loss — you just need to look at it. Regularly. A messy P&L is better than no P&L at all.

Need help making sense of yours? I offer 1 month free catch-up — no pressure, just clarity.

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Or you can send us an email at David@ruckandreconcile.com