Free profit and loss template for small businesses

A profit and loss statement is a simple way to summarise your business income and expenses during a specific time, to tell you how much money your business is making or losing. It’s key to understanding and managing your business’s financial health.

A profit and loss statement can be created to analyze and compare business performance over a month, a quarter or a year, and are an effective tool to review cash flow and predict future business performance.

A profit and loss statement is used by businesses in three ways. It’s used as one of the financial statements in a business plan for the purpose of showing the profits of the business over time. In this case, the profit and loss statement might be a pro forma, projected document for an application for a startup business loan.

A profit and loss statement can also be used as a tool for an internal analysis of the health of the business. The percentages of each expense to gross income are useful in this type of analysis. Some profit and loss statements compare figures for sales and expenses to budgeted figures to show whether projected goals have been met.

A profit and loss statement is also useful for tax preparation. A detailed profit and loss statement can be prepared for an entire year, ending at the date of the end of the fiscal year, and it is used by the tax preparer to compile the income and expenses for the business’s tax return.

Is it important to prepare and review a profit and loss statement for small business regularly as it will give you insight into area of the business where you are making money (or losing money). It will also provide you with where you are spending your money which can help you determine where you may be able to cut costs.

To create a profit and loss statement template you’ll need to fill in actual or forecasted figures against each of the below items for each year. If you use estimated costs, you’ll need to label them clearly.

You’ll also need to clearly state on your profit and loss statement whether your figures are GST inclusive or exclusive.

Sales
A sale is a transaction between two or more parties in which the buyer receives tangible or intangible goods, services, or assets in exchange for money. You can forecast sales by looking at previous years, identifying seasonal trends and analysing the market. This includes total sales, cost of goods sold and gross profit.

Expenses
An expense is the cost of operations that a company incurs to generate revenue. You can anticipate cash outgoing by looking at previous years, identifying seasonal trends and accounting for your major expenses. This includes:

• accountant fees
• advertising and marketing
• rent and rates
• utilities (electricity, gas, water)
• insurance
• and more

Total expenses
Calculate total expenses by adding all expenses.

Net profit
Net profit is the money left over after expenses are paid. Calculate net profit by subtracting expenses from sales.

Make sure to download our free profit and loss statement example template to make things easy!

Calculating a business’ net income involves three steps:

1. Start with the company’s total revenue.
2. Subtract the expenses the business has incurred as well as operating costs. This is the business’ earnings.
3. Deduct tax from the earnings, and you will arrive at the business’ net income.

Our free profit and loss statement example template makes calculating your net income easy – try it out now!