The profit and loss is the one report every owner should read monthly. It answers: did I make money, where did it come from, and where did it go.
The sections
- Revenue: what you earned. Gross, before fees and refunds, with those shown as their own lines.
- Cost of goods sold: what it cost to deliver what you sold. Materials, direct labor, platform fees for some businesses.
- Gross profit: revenue minus COGS. Gross margin is this as a percentage.
- Operating expenses: everything else: rent, software, payroll, marketing, insurance.
- Net profit: what is left. This is what you are taxed on.
What to look at
- Net profit as a percentage of revenue, month over month.
- The three biggest expense lines and whether they are growing faster than revenue.
- Anything that appears in a month it should not (a double-counted card payment usually shows up as a fake expense).
In ProfitBooks
Every line on the profit and loss is clickable. Click it and you see the transactions behind it; click one of those and you can recategorize it. The report updates immediately. Compare months, quarters or years side by side.