Reports & Decisions
How to Read a P&L (Profit and Loss Statement) in 5 Minutes
Short answer
A P&L (profit and loss) statement shows revenue, COGS, gross profit, operating expenses, and net income over a period. Read it top-down: revenue is what you sold, gross profit is what's left after job costs, net income is what's left after overhead. Net income negative = losing money.
The P&L is the single most important report for a small business. Read it every month and patterns jump out — slow seasons, expense creep, pricing problems — before they become emergencies.
The line-by-line tour
| Line | What it means |
|---|---|
| Revenue / Income | Total sales for the period |
| Cost of Goods Sold (COGS) | What it cost to deliver those sales |
| Gross Profit | Revenue minus COGS. Target 35–50% of revenue. |
| Operating Expenses | Overhead: rent, software, marketing, insurance, etc. |
| Operating Income (EBITDA) | Gross profit minus operating expenses |
| Other Income / Expense | Interest, taxes, one-offs |
| Net Income | What's actually left. Negative = losing money. |
What to compare it against
- Same month last year (year-over-year trend)
- Trailing 12 months (smooths seasonality)
- Budget or target margins (am I on plan?)
Frequently asked questions
What's a healthy net income margin?
For solo service businesses: 20–40% after paying yourself a reasonable wage. Trades with employees: 8–15%. Below 5% means pricing or overhead needs work.
Bookkeeping, done for you.
Glo Invoice keeps your P&L, AR, and expenses in sync automatically — no spreadsheets, no surprises.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.