How to Read a Profit and Loss Statement for Your Small Business

In this article, we’re talking about one of the most important tools in your financial toolkit: the profit and loss report. If you want to feel calm, confident, and in control of your business finances, this is where it starts.

The more you understand what this report is telling you, the better equipped you’ll be to make decisions that align with your goals. Clean, accurate numbers help you measure performance and give you clarity about how your business is operating—and how it can become more profitable.

Know Your Why

Yes, we all want to make more money—but it’s important to remember that money is simply a conduit to something greater.

Maybe you want to buy a house. Maybe it’s sending your kids to a particular school. Whatever it is, the goal isn’t the money itself—it’s what the money makes possible.

That’s why clarity matters. When you're clear on your goals, you can align your actions—and your profit plan—to support them.

One of my missions is to help you shift from hoping or guessing to planning and knowing. When you understand your numbers, you can see clearly why something worked (or didn’t). The profit and loss report is your starting point.

What is a Profit and Loss Report?

There are three key financial reports you should review in your business:

Profit and Loss Statement

Balance Sheet

Cash Flow Statement

The profit and loss statement shows how much your business earned and spent over a period of time. For example, let’s say you generated $10,000 in income during July and spent $8,000 on expenses. That leaves you with $2,000 in profit for the month.

Every business owner needs to know:

How much money came in

How much money went out

And what profit was left over

If you’re new to business and not ready for platforms like Xero or QuickBooks, my course The Finance Fix includes a pre-built spreadsheet that calculates your profit and loss for you—perfect for getting started and building confidence with your numbers.

Know Your Numbers

The balance sheet shows your overall financial position. For example, you may be making a profit, but if you have a $500,000 business loan, your net position may still be weak. It’s a snapshot of how strong or fragile your business really is.

The cash flow statement shows how cash is moving in and out of your business. It helps you see whether there’s enough money in the bank at any point in time and how efficient your business is at generating cash.

Your assets include the money you have in the bank, outstanding invoices (money owed to you), and any owned property or valuable items. You’ll also want to account for liabilities—what you owe, such as loans or credit card balances. Your goal is to have net assets (assets minus liabilities) that indicate a healthy, sustainable business.

It's Time to Uplevel

The recent round of To The Moon, my profit planning program, exceeded all expectations. Nine incredible women showed up to learn, grow, and take control of their finances while finding support in a like-minded community.

I’ll be running it again at the end of this year or early next year. If you're ready to tap into the potential of your business, stay accountable, and make your numbers work for you, send me a DM on Instagram to reserve your spot. Spaces are limited and include two one-on-one sessions with me.

One of the most powerful things we do in To The Moon is set intentional financial goals, then adjust and refine them as we go. Business isn’t always predictable, and that’s okay. Profit plans aren't about perfection—they’re about direction. If you planned for one result and got another, that’s simply an opportunity to tweak and realign.

Final thoughts

The first step to making more profit is simply looking at your numbers.

Review your profit and loss statement each month to understand how your income and expenses are tracking. If your business is loss-making, ask yourself why. What decisions led to that outcome—and what can you do differently next month?

Don’t be afraid to look back. That’s how you propel yourself forward.

Activity: If you use Xero or QuickBooks, open your dashboard now and generate a profit and loss statement. If you don’t use any accounting software yet, grab my course The Finance Fix and start using the included spreadsheet to track your income and expenses.

See you in the next post—I look forward to connecting with you.

Curious to to learn more and dive even deeper? listen to my free (and secret) podcast.