{"id":5024,"date":"2025-03-21T06:00:00","date_gmt":"2025-03-21T13:00:00","guid":{"rendered":"https:\/\/qa.simplifimoney.com\/blog\/?p=5024"},"modified":"2025-03-26T05:47:59","modified_gmt":"2025-03-26T12:47:59","slug":"how-to-make-a-profit-and-loss-statement","status":"publish","type":"post","link":"https:\/\/www.quicken.com\/blog\/how-to-make-a-profit-and-loss-statement\/","title":{"rendered":"How to Make a Profit and Loss Statement for a Small Business"},"content":{"rendered":"\n

In the United States alone, over 5.4 million businesses<\/a> were launched in 2023 \u2014 pretty staggering, right? Given today\u2019s online marketplace, many entrepreneurs don\u2019t even need brick-and-mortar storefronts, putting small business ownership well within reach. <\/p>\n\n\n\n

If you own a small business, profit and loss statements can help you track business performance, identify areas where you can grow, predict upcoming expenses, and even help you get new financing to take your business to the next level. <\/p>\n\n\n\n

Not sure how to create a profit and loss statement? Don\u2019t worry, we\u2019ve got you covered \u2014 let\u2019s take a look at what you need to make it happen.\u00a0<\/p>\n\n\n\n

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See how Quicken Business & Personal creates the reports you need in a few clicks.
\n Get started \u2192<\/a><\/p>\n<\/div>\n\n\n\n\n

So, what is a profit and loss statement?<\/h2>\n\n\n\n

A profit and loss statement is an evaluation of how much money your business is making \u2014 consider it a financial health checkup for the state of your business. An effective profit and loss statement will take into account your operating expenses, business incidentals, and revenue gained throughout the year (or even quarterly). <\/p>\n\n\n\n

If you\u2019re new to small business ownership, creating a profit and loss statement can certainly seem daunting \u2014 but we promise you won\u2019t need a TI-84 graphing calculator and a protractor. When tax season rolls around, you\u2019ll want to know where you stand, how much money you\u2019re bringing in, how much you\u2019re spending running your business, and whether you\u2019re covering your tax obligations. <\/p>\n\n\n\n

By tracking your income and expenses, your profit and loss statement can help you guide your small business toward a successful future. <\/p>\n\n\n\n

What a profit and loss statement can do for your small business<\/h2>\n\n\n\n

A profit and loss statement can be a huge help in growing your business. Here are just a few of the reasons you might want to put one together.<\/p>\n\n\n\n

To track business performance<\/h3>\n\n\n\n

It may seem like a no-brainer, but the biggest impact a profit and loss statement can have for your business is simply showing you how things are going. You can use the information from a profit and loss statement to help you set your pricing strategy, to show you which of your various products or services are the most profitable, and to help you predict upcoming needs in your business forecasting. <\/p>\n\n\n\n

To secure further funding<\/h3>\n\n\n\n

Additionally, a profit and loss statement is important to have if you\u2019re trying to secure funding for your small business. <\/p>\n\n\n\n

Whether you\u2019re looking for investors or a small business loan, you\u2019ll need solid financial statements to prove that your business is worth the risk. A clear outline of your business profits versus losses can highlight the strengths of your business operations and give lenders an accurate assessment of your finances.<\/p>\n\n\n\n

To stay ahead of tax season<\/h3>\n\n\n\n

Staying ahead of your tax obligations is crucial for any successful business. Profit and loss statements can help you make sure your business is appropriately assessing your tax obligations. Even if your business is what\u2019s known as a pass-through entity, meaning you\u2019ll pay those taxes as part of your personal taxes, your profit and loss statement is an important part of that calculation.<\/p>\n\n\n\n

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See how Quicken Business & Personal speeds up tax reporting.
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How to create a profit and loss statement<\/h2>\n\n\n\n

Let\u2019s take a look at how you can create your own profit and loss statement for your small business. Gather your financial documents and follow each step!<\/p>\n\n\n\n

1. Calculate your total revenue<\/h3>\n\n\n\n

The first step in creating your profit and loss statement is to calculate your total revenue. Has it been a slow year? Maybe your seasonal sledding business is just waiting for the first snowfall. Even if you\u2019re in the black and making money hand over fist, you\u2019ll need to accurately gauge how much you\u2019re bringing in on the goods or services you\u2019ve sold.<\/p>\n\n\n\n

Your total revenue includes all the money you\u2019ve made by operating your business \u2014 it includes all your sales earnings before interest and taxes, but not loans. You can import those figures into an Excel spreadsheet to aggregate your data manually, or you can use software like Quicken Business & Personal<\/a> to track your business finances and generate your profit and loss statements automatically.<\/p>\n\n\n\n

2. Determine your cost of goods sold (COGS)<\/h3>\n\n\n\n

Your cost of goods sold (COGS) refers to the money your business spent to acquire, create, and sell your products or services. If you\u2019re selling baked goods, for example, your COGS includes things like the ingredients you use and your means of delivering them. <\/p>\n\n\n\n

To calculate your COGS, there\u2019s a basic formula. Start with your beginning inventory, add your purchases, and then subtract your ending inventory \u2014 this will equal the cost of goods sold. If the bakery started the month with 20 pounds of flour worth $10, and then bought another 10 pounds for $5, that\u2019s a total of 30 pounds of flour worth $15. If it finishes the month with 15 pounds of flour left, that means it used the other 15 pounds, or half of the total, which is worth $7.50.  <\/p>\n\n\n\n

3. Add up your other expenses<\/h3>\n\n\n\n

The good news is that your business expenses are generally tax deductible \u2014 not just your cost of goods sold but other costs too.<\/p>\n\n\n\n

Do you run marketing campaigns on social media? Business expenses. Hire a web designer to optimize your domain? That\u2019s an operating cost, too. Paying your employees? Another cost of doing business. Depreciation of your assets? Yep, that too! These are all expenses business owners need to account for, and they all affect your bottom line. <\/p>\n\n\n\n

Expense tracking<\/a> is crucial \u2014 are you accounting for expenditures as efficiently as possible?<\/p>\n\n\n\n

4. Figure out your gross profit<\/h3>\n\n\n\n

To figure out your gross profit, subtract your total expenses (including any cost of goods sold) from your total revenue. Remember, if this all feels overwhelming, there are apps that can help you manage your business finances and do most of this for you, like Quicken Business & Personal<\/a>.<\/p>\n\n\n\n

5. Determine if you\u2019re making a net profit or loss<\/h3>\n\n\n\n

Your net profit is what you get to keep after paying taxes on your gross profits. Remember, new businesses usually take around three years to start making money and operating in the black. In fact, many successful businesses start out as a side hustle<\/a> until the business owner can earn enough to support themselves financially.<\/p>\n\n\n\n

Want to learn more? These 5 money management skills<\/a> lie at the heart of every successful business.<\/p>\n\n\n\n

How to analyze your profit and loss statement<\/h2>\n\n\n\n

To learn about your business from your profit and loss statement, start with the income at the top. When you list out your income streams according to your different products and services, you can start to see how much money you\u2019re making on each one. That gives you a feel for where you should spend your energy and where you might be leaving money on the table.<\/p>\n\n\n\n

Then, look through your expenses. Is there anything you can cut back on? Is there room to start paying for that one app that would make your life easier? <\/p>\n\n\n\n

Some business owners jump the gun a bit, paying for big-business services they might not need yet. Others have trouble getting off the ground because they don\u2019t want to pay for the things they really do need to grow. A profit and loss statement lists it all out for you, so it\u2019s a great place to start when you\u2019re trying to evaluate your business operations.<\/p>\n\n\n\n

Another great way to see the value of profit and loss statements is to generate them over different time periods. What did the statement look like last month? How about the month before? The more profit and statements you look at, the more comfortable you\u2019ll get reading them and the more you\u2019ll learn about your business.<\/p>\n\n\n\n

Over time, those P&L statements will be a huge help in watching your business grow. If you keep good records, you can compare your growth, sales, and profit from day one, monitoring pain points or bottlenecks and even forecasting future growth. <\/p>\n\n\n\n

Want to spend less time on your financials and more time running your business? Quicken Business & Personal offers built-in reports you can run automatically<\/a>.<\/p>\n\n\n\n

Making your business work for you<\/h2>\n\n\n\n

Owning a business isn\u2019t just a hobby \u2014 you pour your heart and soul into it because it\u2019s your passion. When looking at the finances of your company, consider how you value your own time as well. In many instances, small business owners don\u2019t pay themselves \u2014 especially in the first year or two of operation. If you need to make ends meet in your personal life while operating your own organization, your profit and loss statement can help you determine a reasonable salary for your efforts.<\/p>\n\n\n\n

Need some extra cash to launch your business? Check out these 25+ ways to make quick money<\/a>.<\/p>\n\n\n\n

Are there any other financial reports I might need?<\/h2>\n\n\n\n

Along with profit and loss statements, balance sheets and cash flow statements can also help you get a solid picture of your business\u2019s finances. While these additional financial reports are ultimately necessary, they\u2019re tougher to put together on your own.<\/p>\n\n\n\n

If you want to take a deeper dive into your company\u2019s financials, Quicken Business & Personal<\/a> can track your business income and expenses automatically and generate the reports you need with just a few clicks.\u00a0<\/p>\n\n\n\n

Passion over profit?<\/h2>\n\n\n\n

It\u2019s no secret that people start their own businesses because they\u2019re passionate about their craft. Record producers, artists, chefs \u2014 these industries can be lucrative for some and a pay cut for others. As long as you can keep operating your business and enjoying it, that\u2019s real freedom in and of itself.<\/p>\n\n\n\n

If your business hits a rough patch, remember that Apple was plummeting in the mid-80s and Steve Jobs was ousted, only to be rehired a decade later to dominate the market. Bankruptcy loomed for Adidas in the early 90s \u2014 now, you won\u2019t find a soccer pitch without Adidas gear on it anywhere on the globe. <\/p>\n\n\n\n

By running your financial reports regularly and keeping a close eye on your operations, you\u2019ll be in good shape to react quickly to market changes and take advantage of new opportunities as they come along.<\/p>\n\n\n\n

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See how Quicken Business & Personal cuts the admin time for your small business.
\n Get started \u2192<\/a><\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"

Profit and loss statements can help you track your business performance, identify areas where you can grow, and predict upcoming expenses.<\/p>\n","protected":false},"author":59,"featured_media":5027,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"113","_seopress_titles_title":"How to Make a Profit and Loss Statement for a Small Business | Quicken","_seopress_titles_desc":"Profit and loss statements can help you track your business performance, identify areas where you can grow, and predict upcoming expenses.","_seopress_robots_index":"","inline_featured_image":false,"footnotes":""},"categories":[113],"tags":[],"class_list":["post-5024","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-small-business"],"acf":[],"jetpack_featured_media_url":"https:\/\/www.quicken.com\/blog\/wp-content\/uploads\/2022\/10\/woman-in-apron-holding-clay-cup-smiling-at-open-laptop.jpg","_links":{"self":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts\/5024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/comments?post=5024"}],"version-history":[{"count":7,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts\/5024\/revisions"}],"predecessor-version":[{"id":8683,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/posts\/5024\/revisions\/8683"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/media\/5027"}],"wp:attachment":[{"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/media?parent=5024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/categories?post=5024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.quicken.com\/blog\/wp-json\/wp\/v2\/tags?post=5024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}