Most trade owners I talk to get a P&L every month. Very few actually read it.
It lands in the inbox. It gets forwarded to the CPA. And that’s the last anyone sees of it until tax time.
That’s a shame, because your P&L is the one report that tells you whether last month’s work actually paid you. Not how busy you were. Whether you made money.
Reading a P&L will never be as fun as buying a new truck. But it’ll tell you whether you can afford one.
The Five-Minute Tour
You don’t need an accounting degree to read a P&L. You need five minutes and a cup of coffee. Read it top to bottom.
Revenue. Is it up or down from last month? Now compare it to the same month last year. Trades are seasonal, so last October tells you more than last month does.
Job costs (Cost of Goods Sold). This is the labor, materials, subs, and equipment rental that went into the actual jobs. If these costs are buried in your general expenses, your P&L is telling you a story that isn’t true. That’s a setup fix, and it’s worth making.
Gross profit. Revenue minus job costs. This is what your work actually earned before the lights, the trucks, and the office get paid.
Overhead. Rent, insurance, vehicles, software, office staff. Overhead rarely jumps. It creeps. Watch for any line that grows faster than your revenue.
Net profit. What’s left at the bottom. This is the number that pays you, pays down debt, and funds next year’s growth.
The One Number to Check Every Month
If you only look at one thing, make it gross profit margin by job type. That’s gross profit divided by revenue, split out for each kind of work you do.
Here’s why it matters. Say last month looked like this:
| Job type | Revenue | Job costs | Gross profit | Margin |
|---|---|---|---|---|
| Service calls | $40,000 | $22,000 | $18,000 | 45% |
| New installs | $60,000 | $45,000 | $15,000 | 25% |
Installs brought in more money. Service calls kept more of it.
The bigger invoice isn’t always the better job. If you don’t know your margin by job type, you could be chasing the work that pays you the least.
In QuickBooks, this comes from tagging every income and cost line to a job type using classes or projects. Set it up once and the report runs itself.
3 Questions to Ask Your P&L Every Month
- Did my gross margin go up or down, and do I know why?
- Is any overhead line growing faster than my revenue?
- Which job type paid me the most for every dollar it brought in?
If you can answer those three, you’re reading your P&L. Not just filing it.
Your CPA Still Needs It. So Do You.
Your CPA uses your P&L to get your taxes right. You should be using it to run your business. Same report, two very different jobs.
If your P&L shows up every month and you’re not sure what it’s telling you, or your job costs aren’t split out yet, let’s talk.
Laura Blunk, White Rabbit Bookkeeping, La Plata, Maryland
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