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A beginner’s guide to Profit and Loss statements

If you're a first-time small business owner, the learning curve is steep. Among the myriad of tasks, learning your way around a Profit and Loss statement should be high on your list.

Let’s take a closer look at what a Profit and Loss statement is, how to create one and why it's crucial for your business's success.

What is a Profit and Loss statement?

Often called a P&L, a Profit and Loss statement is like a health check for your business. It tells you how well your business is doing financially during a month, a quarter, or a year. It shows you how much money you made, how much you spent, and if you made a profit or a loss.

How to calculate your profit and loss

To create your P&L statement, you can use our free Profit and Loss template. Here’s what you’ll need to include:


Record all the money you earn from your business, like sales, services, anything that brings in money. Make sure to subtract any discounts or refunds you gave.

Costs of selling

If you sell physical stuff, figure out how much it costs you to make or buy those things. These costs include materials, labour, and anything directly related to what you sell.

Gross profit

This is how much money you make after taking away the costs of selling from your total earnings. It shows the profit before considering other expenses.

Operating costs

List all the money you spend on running your business, like rent, utilities, salaries, advertising, insurance, fuel, subscriptions and other regular expenses. These are the costs you need to keep your business going.

Profit or Loss

Subtract your operating costs from your gross profit. If you end up with a positive number, congrats, that's your profit. If it's a negative number, it's a loss.

Either way, analyse the results to see how you can improve in the next period.

Why a Profit and Loss statement is worth your time

Your P&L statement helps you see exactly how your business is doing financially. It shows you where your money is coming from and where it's going.

With a P&L statement, you can find areas to save money and make better financial decisions. It helps you set goals and make a detailed budget for your business.

If your plans include taking out a small business loan, a well-kept P&L statement proves to lenders that you handle your finances well.

At tax time, your P&L statement is crucial. It breaks down your income and expenses, which you need to calculate your taxes correctly.

Great Southern Bank’s Business app not only lets you apply for small business finance with no paperwork to fill out, the Business+ Account tags  your transactions to help you separate your expenses and income. This makes it easier when creating your P&L.

With a clear understanding of where your business stands, you can decide what's working and what's not. You can adjust prices, marketing and how you run your business based on the numbers. It takes out all the guesswork.

Regardless of whether or not you’re a natural with numbers, a P&L statement is a must-have. It’s your compass, helping you figure out where your business is and if you’re on track for success.

For everything you need to know about running a successful business, visit our online Business Hub.

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General Advice Warning

The information provided here is general advice only. We haven’t considered your financial circumstances, needs or objectives. You should ask your Tax Advisor or Accountant before you decide about products mentioned in this article. All care has been taken to prepare this content, but no warranty is given for the information provided. Neither Great Southern Bank or its related entities, employees or agents are liable for the decisions or actions you take because of this information.