Reading a Profit & Loss statement does not have to feel like you’re decoding ancient text. A P&L is really just a story about your business, a simple summary of what you earned, what you spent, and what you actually kept. Once you understand the rhythm of it, everything starts to click and you stop feeling intimidated by the numbers.

It always begins with revenue, the top line, the amount your business brought in before anything else was paid. Take a moment here and look at the pattern. Are your sales growing, dipping, or holding steady. Month-to-month trends tell you a lot about the overall health of your business.

Then you’ll see your Cost of Goods Sold, often called COGS. These are the direct costs that go into delivering your product or service, things like materials, inventory, or production costs. When you take your revenue and subtract your COGS, you get your gross profit. That number shows what you made before your everyday operating costs come into the picture.

After that comes your operating expenses. This list is usually long and includes everything from rent to software to payroll to marketing and all the little tools and subscriptions that keep the business running. This section helps you understand how efficiently you’re managing your operations and where money might be slipping out unnoticed.

Once you subtract those operating expenses from your gross profit, you land on your net profit, sometimes called the bottom line. This is the part everyone wants to know, the amount that is truly left after everything is paid. It is the number that shows whether your business is actually profitable or just busy.

A few things are always worth paying attention to:
• Are your expenses growing faster than your revenue
• Is your gross margin starting to shrink
• Are there expenses that can be tightened or re-negotiated

Your P&L is not just a report you check once a year, it is a roadmap. It shows you what’s working, what isn’t, and where you can make smarter decisions. The more comfortable you become with it, the more confidence you gain in steering your business with intention instead of guessing your way through.