Understanding and Optimizing Your Profit & Loss Statement

Profit = Revenue - Expenses

Besides net profit, gross revenue, and operating profit, what else can I get out of my P&L?

• You can calculate profit margins and compare to your industry standards to ensure that your business isn't overspending or under charging.

• You can use revenue numbers to calculate profitability ratios of each of your products or services.

• You can track trends and make changes throughout the year to optimize your business's expenses and rates.

Understanding the concept of a P&L isn't the difficult part. The structuring of your chart of accounts in a way that will provide the most insight for your unique business within your P&L is the part that most small business owners never end up doing. It’s right up there with consistently updating and reviewing their P&L and key ratios.