Your P&L is telling you something. Are you listening?
For a lot of business owners, monthly financials feel like one more thing landing in the inbox. You glance at the revenue number. Maybe check the bank account. Then move on.
But your financials should do more than tell you what already happened — they should help you make better decisions.
You know that big report you get every month, your Profit & Loss statement (P&L)? It can tell you a lot, once you know where to look.
A quick tour of the numbers that matter.
Revenue is the top line: your sales, deposits, money coming in. Most owners naturally focus here first — but higher revenue does not automatically mean higher profit.
Cost of Goods Sold (COGS) shows the variable costs to deliver your product or service, like materials, direct labor, production costs, subcontractors, etc. COGS is used to calculate gross margin percentage, which helps answer a very important question: "For every extra dollar I bring in, how much do I actually keep?”
One important point: COGS is one of the most misunderstood P&L areas because it depends heavily on accurate categorization.
If expenses are in the wrong categories, then the numbers are misleading. For example, last month, we worked with a client who thought they were profitable on a service line, but after fixing their incorrect COGS categorization, their margin dropped from 42% to 18%.
Operating expenses are your overhead. These are the business's fixed costs, like rent, software subscriptions, administrative payroll, insurance, marketing, utilities, office expenses, etc. They don't move much with revenue and indicate operational health.
We use gross margin percentage and operating expenses to calculate one of the most important numbers in business: your break-even point. This is the revenue you need just to cover costs before profit starts. When you know your break-even point, decision-making becomes much clearer.
So… What Should You Actually Be Looking For?
Your financials are not just reports for tax season. They are tools that help you understand what's working, what's leaking money, and what needs attention before it becomes a bigger issue — whether that's margins shrinking quietly over time, expenses growing too fast, or payroll drifting out of step with revenue.
You do not need to become an accountant to understand your business financially. But you do need financials that are accurate, organized, and explained in a way that actually makes sense (and yes, that’s what we do).