A profit and loss statement can feel like a wall of numbers. Read it in a set order and it becomes a story about your month. Here is a ten-minute routine.
Minute 1–2: Revenue
Look at net revenue and compare it with last month and the same month last year. If your P&L shows revenue by service line, note which lines grew or shrank. Check discounts and refunds as a share of revenue.
Minute 3–4: Cost of services and gross margin
Find product cost and provider pay tied to treatments. Subtract them from revenue to get gross profit, and divide by revenue for gross margin. A falling gross margin usually points to pricing, product cost or discounting.
Minute 5–6: Payroll
Look at total payroll, ideally split between providers and support staff. Calculate payroll as a percentage of revenue and compare with your target and with last year.
Minute 7–8: Operating expenses
Scan rent, marketing, software, equipment, professional fees and merchant fees. Look for anything unusual or larger than expected. Rising marketing should come with rising new clients; if it does not, ask why.
Minute 9: Operating profit
Revenue minus all operating costs. Compare with last month, last year and budget.
Minute 10: What does not show up
The P&L does not show cash, prepaid obligations or inventory on the shelf. Glance at your balance sheet and cash forecast too. A profitable month can still leave cash tight.
Questions to write down
- What changed most compared with last month, and why?
- Is gross margin moving in the right direction?
- Is payroll growing faster than revenue?
- Is there any expense I did not expect?
Bring those questions to your monthly review. Reading the P&L the same way every month makes changes easy to spot.
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