Understanding Your Profit & Loss Statement (Even If You Hate Math)

william8192
Oct 11
2 min read

Many entrepreneurs open their monthly Profit & Loss (P&L) report and think: What am I even looking at? If that’s you, you’re not alone—and you’re in the right place.

Here’s a plain-language guide to understanding your P&L, so you can use it to make smarter, faster business decisions.

What Is a Profit & Loss Statement?

A Profit & Loss Statement (also called an Income Statement) shows:

How much money your business made
How much you spent
What’s left as profit (or loss)

It’s usually organized by month, quarter, or year—and it’s one of the most important reports in your bookkeeping toolkit.

The Key Sections Explained

Your P&L has three main parts:

Revenue – Sales, services, grants, or other income
Expenses – What it costs to run your business (rent, software, supplies, etc.)
Net Profit – Revenue minus expenses = your actual earnings

If the number is negative, that’s a net loss—and a signal to review your costs or pricing.

How to Use It in Real Life

Your P&L can help you:

Spot seasonal trends
Compare spending across programs or locations
Make decisions about hiring, cutting costs, or launching services
Prepare for funding, grants, or loans

It’s not about being perfect at math—it’s about learning the story your numbers are telling.

Indigenous Business Tip

For Indigenous councils or businesses, break down your P&L by program or funding source to show where money is going. This supports transparency and aligns with funding agreements or financial administration policies.