How to read a profit and loss statement in five minutes

The P&L is the one page that tells you whether the month worked. Here is how to read it without an accounting class.

The shape

Income at the top. Expenses by category underneath. Net at the bottom: income minus expenses. That number is what the month earned before tax, not what is in the bank.

Three questions to ask it

1. Is net positive? If not, which category grew?
2. What is the biggest expense line? It is usually vehicle or materials; that is where to look first for savings.
3. Does income match what you invoiced? If invoiced is higher than received, somebody owes you.

What it does not say

It does not show cash in the bank, money you owe, or equipment you bought (those are on the balance sheet). And it is not a tax figure; what you owe comes from the return your preparer builds from it.

Every monthly client gets this page by the 10th, with unpaid invoices listed underneath.