Tax Talk & Business Tips

Your Profit & Loss (P&L) report is more than just numbers—it’s the key to understanding your business’s financial health.

Here’s how to break it down:

1. Revenue (Top Line Sales) – This is the total income from sales before expenses. Are your sales trending up or down?

2. Cost of Goods Sold (COGS) – If you sell products, this includes direct costs like inventory or materials. Keeping this percentage stable is key to maintaining profitability.

3. Gross Profit – Revenue minus COGS. This tells you how much is left to cover operating expenses. A higher margin means more efficiency.

4. Operating Expenses – These are the costs of running your business, like rent, payroll, and marketing. Monitor these to ensure they align with revenue growth.

5. Net Profit (Bottom Line) – The final number after all expenses. Positive? You’re making money. Negative? Time to adjust pricing, cut costs, or drive more sales.

Quick Tip: Compare your P&L monthly to spot trends and make informed decisions.