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How to Create a Profit and Loss Statement (Without Falling Asleep)

  • Writer: Ely Bustos
    Ely Bustos
  • Dec 2
  • 2 min read
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For many small business owners, just hearing the phrase “profit and loss statement” makes their eyes glaze over. But here’s the truth: your P&L isn’t just an accounting form — it’s your business’s performance dashboard.


At SCTAA, we’ve seen too many entrepreneurs avoid this vital report out of fear or boredom — only to miss out on insights that could drive growth, cut costs, or land funding.

Let’s break down how to create a simple, useful profit and loss (P&L) statement — without the accounting jargon, spreadsheets panic, or falling asleep.


Step 1: Understand What a P&L Does

A profit and loss statement (also called an income statement) shows:

  • Revenue (money coming in)

  • Expenses (money going out)

  • Net profit or loss (what’s left after expenses)


Unlike your bank account, it tells you whether your business is actually profitable, not just liquid.


Step 2: Start with Revenue

List all your income sources for a set period — monthly, quarterly, or YTD:

  • Client payments

  • Product sales

  • Subscription or retainer income

  • Grants or other earned revenue


Consistency matters — record income when it’s earned, not when it hits your account (if using accrual accounting).


Step 3: List Operating Expenses

Break out recurring business costs:

  • Software subscriptions

  • Marketing/ads

  • Contractor pay

  • Supplies

  • Rent or utilities

  • Insurance

  • Mileage or auto costs


Bonus: If you use a tool like QuickBooks or Xero, these are often already categorized for you.


Step 4: Subtract to Get Your Net Profit

Revenue – Expenses = Profit (or loss)


If the number is negative, you’re spending more than you earn. If it’s positive, you’ve got a profit — and can reinvest or draw funds confidently.


Step 5: Use It to Make Smarter Decisions

Your P&L isn’t just a filing form — it’s a strategic tool. Use it to:

  • Spot rising costs before they snowball

  • Know when you're ready to hire

  • See how one product or service is outperforming others


Final Thought:

Even a basic P&L gives you power. Don’t let accounting terms keep you in the dark — and definitely don’t wait until tax season to figure this out.


Need help setting yours up? SCTAA can walk you through it step by step.


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