For instance, a gross profit margin of 40% indicates that 40 cents of every dollar in sales are retained after covering production costs. For example, a company may report a gain from selling a subsidiary, which boosts net income but does not indicate primary business performance. Similarly, foreign exchange gains or losses, driven by currency market fluctuations, can cause earnings volatility, especially for companies with extensive international operations. Understanding these items is essential for evaluating a company’s true financial health. To get a comprehensive, accurate, and actionable picture of your business’s financial health, you need all three financial statements. Failure to do so could leave you with inaccurate numbers and misinformed decision-making, ultimately harming your business.

The template provides space for all the above expenses, but add as many rows as needed. HighRadius leverages advanced AI profit and loss statement to detect financial anomalies with over 95% accuracy across $10.3T in annual transactions. With 7 AI patents, 20+ use cases, FreedaGPT, and LiveCube, it simplifies complex analysis through intuitive prompts. Backed by 2,700+ successful finance transformations and a robust partner ecosystem, HighRadius delivers rapid ROI and seamless ERP and R2R integration—powering the future of intelligent finance. Explore how leading finance teams automate reconciliations, streamline journal entries, and fast-track month-end without sacrificing accuracy. Here are the most popular options—including one you should definitely avoid.

Operating Expenses

However, even small businesses can benefit from preparing a P&L statement, as it helps track financial performance and can open doors to growth opportunities and potential financing. Automation is the best way to streamline the workflow and ensure the quality of your final financial statements. So you can make your life and the life of your accountant easier by implementing Synder. This way, you’ll have total control and access to the most detailed and precise info at any time. The disadvantage of the single-step method is that it doesn’t provide as much detail.

Profit and loss statement example and template

Two common measures of profitability are gross profit margin and net profit margin. All of our free profit and loss statement templates are customizable to your needs! Edit or remove line items that are not relevant to your business, or add in lines as you go to fit with unique revenue sources and business expenses. Typically under operating expenses or as a contra‑revenue line, depending on the accounting method.

At EisnerAmper, our trusted team has decades of experience helping companies better understand their financial health and opportunities for future strategic growth and profit. With a detailed list of all gains and losses in a specific time frame, business owners can identify their risks and financial drains, and immediately intervene to control costs. At the same time, income statements reveal what brings the most profit, and helps decision makers double down on what works best.

• When you subtract COGS from your sales revenue, you get gross profit.
• It begins with an entry for revenue, known as the top line, and subtracts the costs of doing business, including the cost of goods sold, operating expenses, tax expenses, and interest expenses.
• Either your expenses are too high, you’re revenue is in a slump, or both—and it might be time to reevaluate strategy.
• Startups and new businesses that do not have a financial history use a pro forma financial statement instead of a profit and loss statement.
• With cash accounting, you only record revenue when payments actually hit your bank account and expenses when you pay them.

Every profit and loss statement starts off by showing your company’s revenues. Learn how to build, read, and use financial statements for your business so you can make more informed decisions. When cash enters and exits the business, only then does the cash method, also known as the cash accounting method, come into play. This straightforward approach accounts only for cash paid or received. When cash is received, a business documents the transaction as revenue; when cash is used to pay bills or commitments, the transaction is recorded as liability. This approach is often used by individuals and smaller organizations seeking to handle their personal finances.

• This ensures your P&L-based forecasts align with actual cash movements — helping controllers and finance directors create more reliable budgets and avoid unexpected variances.
• Whether you need a high-level overview or want to drill into specific spend categories, Ramp gives you the visibility and control to manage costs and forecast confidently.
• It provides an extra pair of experienced eyes to review your finances to prevent reporting mistakes and instill confidence in stakeholders and investors.
• Businesses preparing a P&L statement can choose between single-step and multi-step formats, depending on their needs.

It’s normal for the financials of a business plan to be your best educated guess at what the next few years of numbers will be. This ensures your P&L-based forecasts align with actual cash movements — helping controllers and finance directors create more reliable budgets and avoid unexpected variances. Read our in-depth report on the 2025 state of cash flow forecast challenges in mid-market companies.

Earnings before interest and taxes (EBIT)

If you’re operating with a loss, a P&L statement can help you learn why. Operating expenses are where you list all of your regular expenses as line items, excluding your costs of goods sold. Arguably, the real value lies in how these figures are categorised and analysed.

It’s time-consuming and difficult to scale, especially in organisations with multiple entities, locations, or disconnected systems. More than this, a consistent P&L layout also plays a vital role in stakeholder communication, which is increasingly important for all finance leaders. For example, it gives boards and investors a clear, trustworthy view of how the business is performing – and whether profit trends are sustainable. Over time, it essentially becomes an anchor for strategic decisions around pricing, headcount, investment, expansion, and more.