Calculating Your Monthly Profit
How to Calculate Your Monthly Profit
(And Actually Understand What It Means)
Your P&L report is the most important financial document in your business. Here's how to read it, understand it, and use it to make real decisions.
7 min read · By Priscilla · Desert Soul Sisters BookkeepingLet me ask you something. When was the last time you looked at your Profit & Loss report? And when you did — did you actually understand what you were looking at? Or did you scroll through it, think "okay, numbers," and close it as fast as possible?
If that second one sounds familiar, you are not alone. The P&L is one of those reports that sounds intimidating, looks complicated, and feels like something only accountants care about. But here's the truth: it's the single most important number in your business. And once you understand it, you'll wonder how you ever made decisions without it.
In this post I'm going to break it down completely — what it is, how to calculate it, and most importantly, what to actually do with the number once you have it.
"Your profit number isn't just a report. It's your business telling you the truth about whether what you're doing is actually working."
What Is a Profit & Loss Report (In Plain English)?
A Profit & Loss statement — also called a P&L or an income statement — is simply a summary of all the money your business made and all the money your business spent over a specific period of time. What's left after you subtract the spending from the earning is your profit. Or your loss, if you spent more than you made.
That's it. It's not more complicated than that. The confusion usually comes from the accounting terminology — terms like "gross profit," "COGS," and "net income" that nobody ever explained to you in plain English. So let's fix that right now.
Revenue − Cost of Goods Sold = Gross Profit
Gross Profit − Operating Expenses = Net Profit
What Each Line on Your P&L Actually Means
Revenue (also called Income or Sales)
This is every dollar your business brought in during the month — client payments, service fees, product sales, everything. Before any expenses come out. This is your top line number.
Cost of Goods Sold (COGS) — Service Businesses Often Skip This
COGS are the direct costs of delivering your service — things like subcontractors, materials, or software that's specifically tied to client work. If you're a pure service business with no direct delivery costs, your COGS may be zero. That's okay.
Operating Expenses
These are all the costs of running your business that aren't directly tied to client delivery. Think: software subscriptions, marketing, office supplies, your bookkeeper, professional development, bank fees, insurance.
Net Profit (Your Bottom Line)
This is what's left after everything. Revenue minus COGS minus operating expenses. This is the number that tells you whether your business is actually profitable — not just busy, not just bringing in revenue, but genuinely making money after all the costs.
A Real P&L Example for a Solopreneur
Let's make this concrete. Here's what a simple monthly P&L looks like for a service-based solopreneur:
So in this example — a photographer brings in $4,980 in a month and nets $4,208 after all costs. That's an 84% profit margin, which is healthy for a service-based creative. Notice that merchant processing fees sit in COGS, not operating expenses — because they're a direct cost of getting paid for each session. From that $4,208 you'd set aside ~$1,260 for taxes (30%) and pay yourself the rest on a set date.
What to Look for Every Month
Once you're running a P&L monthly, here are the questions to ask every single time you look at it:
🚩 Revenue dropping?
Did you lose a client? Did you stop marketing? Or is it a seasonal dip? Your P&L will show the trend over time.
🚩 Expenses creeping up?
When did that subscription renew? Are you spending more on delivery than you realized? Small leaks sink big ships.
✅ Profit margin healthy?
For service businesses, aim for 60–80%+ net profit margin. If you're below that, look at expenses first, then pricing.
✅ Can you afford to grow?
Want to hire help or invest in a course? Your P&L tells you if the numbers support it — before you commit.
"A P&L isn't just a report you send to your CPA. It's a monthly conversation your business is trying to have with you."
How to Get Your P&L Report Every Month
If you're using QuickBooks or Xero, your P&L is already being generated automatically — as long as your books are current and properly categorized. Here's how to pull it:
In QuickBooks Online
Go to Reports → Standard → Profit and Loss. Set the date range to the current month. Run report. That's it.
In Xero
Go to Accounting → Reports → Profit and Loss. Select your date range and run. You can also set up a scheduled email to receive it automatically each month.
Don't Have Clean Books? Here's the Problem.
Your P&L is only as useful as the data behind it. If your books are behind, miscategorized, or a mess — your P&L will be wrong. And making decisions based on wrong numbers is worse than making no decisions at all.
This is the core reason I help clients get their books clean and current first. Because once your numbers are accurate, the P&L becomes one of the most powerful tools in your business.
- Transactions categorized correctly every month
- All accounts reconciled against bank statements
- P&L delivered by the 20th — every single month
- Plain-English explanation of what it means for your business
The Bottom Line
Your Profit & Loss report is not just an accounting document. It's the clearest picture your business can give you of what's actually working — and what needs your attention. Revenue minus expenses equals profit. Simple math, powerful insight.
The goal isn't to just run the report. It's to understand what it's telling you and use it to make better decisions — about pricing, about expenses, about when you can afford to grow, and about how much you can confidently pay yourself every month.
If you've been avoiding yours, start this month. Pull the report, look at the numbers, and ask yourself: is this business actually as profitable as it feels? The answer might surprise you — in the best possible way.
Want someone to run this report for you — and actually explain it?
That's exactly what I do every single month for my clients. Clean books, a clear P&L, and a plain-English breakdown of what it means. Let's talk.
Book a Free Fit CheckThe information in this post is for educational purposes only and reflects general best practices for small business owners. It is not financial, legal, or tax advice. Every business situation is different — please consult with your CPA, tax professional, or financial advisor to determine what's right for your specific circumstances before making any financial decisions.
