Your profit and loss statement answers one question: did the business make money this month, and why? You don’t need an accounting degree to read it — just a few minutes and a routine.
Start with revenue
Compare this month with the same month last year, not just last month. Seasonality hides in month-to-month comparisons.
Check your gross margin
Revenue minus the direct cost of delivering it. A falling margin with steady revenue usually means prices haven’t kept up with costs.
Scan operating expenses
Look for anything that grew faster than revenue. Software subscriptions and contractor costs are the usual suspects.
End on net profit — and cash
Profit isn’t cash. If profit looks healthy but the bank balance doesn’t, look at receivables, inventory and loan payments next.
