Understanding the Profit & Loss Statement

As a small business owner, you've probably heard of a Profit & Loss (P&L) statement, but do you know how to use it? Also known as an income statement, the P&L is one of the most important financial reports for your business. It's a snapshot of your company's performance over a specific period, showing your revenue, costs, and expenses.

Think of it as a report card for your business. It tells you if you're making a profit or if you're operating at a loss. Here’s a simple breakdown of the main components:

• Revenue: This is the total amount of money your business earned from sales and other income sources. It's the top line of the report.

• Cost of Goods Sold (COGS): This is what it costs you to produce the products or services you sell. Subtracting COGS from your revenue gives you your Gross Profit.

• Operating Expenses: These are the costs of running your business that aren't directly tied to your products, such as rent, salaries, utilities, and marketing.

• Net Income (or Loss): This is the bottom line. After subtracting all your expenses from your revenue, this number tells you if your business was profitable during that period.

Regularly reviewing your P&L helps you spot trends, identify areas where you can cut costs, and make informed decisions to improve your business's financial performance.

As always, if I can be of any help, please reach out to me at; mdaviscpb@qbocleanups.com.