If you’ve ever opened your Profit and Loss report in QuickBooks and thought, “Okay… now what?” You’re not alone.

It’s easy to think of financial reports as something you generate for your tax preparer. But your Profit and Loss report (also called an income statement) isn’t just a once-a-year document. 

It’s one of the most powerful tools in your bookkeeping toolkit.

In this post, we’re going to break down what the Profit and Loss report actually shows, why it matters, and how you can use it to make smarter decisions for your business. Plus, we’ll share some free videos that walk you through specific ways to customize, review, and simplify your report in QuickBooks Online.

What Is the Profit and Loss Report?

The Profit and Loss report summarizes your income, cost of goods sold (COGS), and expenses over a specific period—typically monthly, quarterly, or annually.

It answers one very important question: Did I make money?

Here’s a basic breakdown of what it shows:

• Income – How much revenue your business brought in
  
  
• COGS – Direct costs tied to producing goods or delivering services
  
  
• Expenses – Overhead like rent, software, advertising, or utilities
  
  
• Net Profit (or Loss) – What’s left after subtracting COGS and expenses from your income

Sounds simple, right? But this report holds the key to all kinds of insights.

Why Your Profit and Loss Report Matters

Most small business owners track how much money is in the bank, but that’s not the same thing as tracking profit. 

The Profit and Loss report helps you:

1. Understand if You’re Actually Profitable

Having cash in the bank doesn’t always mean you’re profitable. And being profitable doesn’t always mean you have cash on hand. (Surprising? Totally normal.)

The P&L shows whether your business model makes sense. If you’re working constantly but your net income is razor-thin or negative, that’s a red flag.

2. Spot Unnecessary Expenses

By regularly reviewing your expenses, you’ll likely find subscriptions you forgot to cancel or tools you no longer use. These little charges can really add up.

You can even run your Profit and Loss by Month to track when expenses spike. Here’s a quick video on how to do that:
📹 How to Review Profit and Loss by Month in QuickBooks Online

3. Track Income Trends

Are your sales growing? Which services are most profitable? When is your busiest season? The P&L report makes it easy to spot trends—if you check it regularly.

You can even go a step further and track income by client:
📹 How to Run a Profit and Loss by Customer in QuickBooks Online

4. Set Realistic Budgets

Want to forecast next quarter? You’ll need to understand your historical revenue and expenses. The Profit and Loss report gives you that foundation, so you’re not just guessing.

Using Your Profit and Loss Report for Decision Making

Your Profit and Loss report isn’t just a snapshot—it’s a story. And the more often you look at it, the more you’ll understand what that story is trying to tell you.

Here are a few ways you can use it to make smart decisions:

Decide Which Services to Keep Offering

If you offer multiple services or products, run your P&L by class or customer. You might find that one type of work brings in most of your profit—or that another takes a ton of time and doesn’t contribute much at all.

You can also use tools inside QuickBooks to simplify this breakdown:
📹 Simplify Your Profit and Loss: Reporting Solutions for Tracking Client Revenue

Adjust Pricing or Reduce Overhead

Noticed your profit margins are shrinking? Your Profit and Loss report will show whether it’s because of rising expenses, falling income, or both. This data helps you make adjustments with confidence—whether that’s raising your rates or cutting unnecessary costs.

Monthly Review Checklist: Keep It Simple and Useful

If you don’t already have a monthly review habit, your Profit and Loss report is the perfect place to start. Even just a 10-minute check-in once a month can give you major clarity.

Not sure what to look for? Here’s how I tell my clients to review their profit and loss:
📹 Gentle Frog Monthly Bookkeeping Quality Control Checklist – Profit and Loss

This short video walks you through the steps to:

• Review for errors or surprises
  
  
• Compare against previous months
  
  
• Spot trends before they become problems
  
  
• Confirm that income and expenses are categorized correctly

But Wait—Where’s the Cash?

We often hear this: “My Profit and Loss report says I made $8,000. So… why doesn’t my bank account have $8,000 in it?”

That’s the difference between profit and cash flow.

Your P&L doesn’t show money spent on loan payments, credit card payments, asset purchases, or personal draws. It also doesn’t reflect delays in payment (like waiting on invoices).

While your Profit and Loss report tells you if you’re running a profitable business, you’ll want to pair it with your Balance Sheet and Statement of Cash Flows for a full picture.

How Often Should You Review It?

Here’s a simple rule: if you’re running a business, run your Profit and Loss report monthly.

This keeps you in touch with what’s working and what’s not. You don’t have to become a financial expert, just spend 10 minutes a month noticing patterns and asking questions.

Are expenses up? Are you charging enough? Did income dip?

Use those answers to guide decisions, not just at tax time—but all year long.

Final Thoughts: Your Profit and Loss Report is Your Business’s Health Check

If you’ve been ignoring your Profit and Loss report because it felt too technical or confusing, you’re not alone. But once you understand what it shows—and how to use it—you’ll wonder how you ever ran your business without it.

It’s not just about knowing your numbers. It’s about running your business with clarity and confidence.

So next time you open your bookkeeping software, don’t just glance at your bank balance. Run your Profit and Loss report. Take a few minutes to really look at it.

And if you need help? That’s exactly what we’re here for.