The Profit & Loss statement is the most important report your bookkeeper produces. Here's what it shows and how to read it.
A Profit & Loss statement (also called an Income Statement) shows your revenue, your expenses, and your resulting profit (or loss) over a defined period - typically a month or a year.
A standard P&L has three main blocks: Revenue (what came in), Cost of Goods Sold or Cost of Services (the direct costs of producing what you sold), and Operating Expenses (everything else it takes to run the business). The math gives you Gross Profit, then Net Profit.
Look at Gross Profit margin first - that tells you whether your prices are healthy versus your direct costs. Then look at the operating expenses that have grown month-over-month. Trends matter more than any single line.
A P&L doesn't show cash, debt, or what you own. For those, you need the Balance Sheet. Together they tell the full story.
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