Reporting Guide
How to read your Profit & Loss report (without a headache).
Your P&L is the heartbeat of your business. Here is how to understand it in 5 minutes.
1
Start with Total Income
This is the top line. It is everything you billed or collected before any costs were taken out.
2
Look at Cost of Goods Sold (COGS)
These are the direct costs of providing your service or product. Subtract this from Income to get your Gross Profit.
3
Review Operating Expenses
Rent, payroll, software, and marketing. These are the costs of keeping the lights on.
4
The Bottom Line (Net Income)
What is left over after everything. If this is positive, you made money. If it is negative, you had a loss.
Pro Tip
“Always compare your P&L to the previous month or year to spot trends before they become problems.”