Guide
You want a profit and loss template.
Here's one that fills itself in. Put in what you sell, what it costs you to deliver, and what you spend to keep the lights on. It gives you the three numbers a P&L exists to give you: gross profit, operating profit, and the margin on each.
Build the full model with the figures below already in, or fill in your own profit and loss first.
Then it does the thing a P&L template can't. It shows you the same business in cash, month by month, because profit and cash are different things. The gap between them is where most young companies get into trouble.
Your profit and loss
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| Profit and loss | A month | A year |
|---|---|---|
| Revenue | - | - |
| Cost of sales | - | - |
| Gross profit | - | - |
| Operating costs | - | - |
| Operating profit | - | - |
Operating margin
-
What the P&L can't see
A profit and loss records a sale the day you make it. The money often arrives later. Say your customers pay in sixty days. You've sold, delivered and paid your suppliers and your team for two full months before the first dollar comes back.
The P&L above says you made money in those two months, and it's right. Your bank account says otherwise, and it's also right. Put in when your customers actually pay you, and what's in the bank to start with.
The same business, in cash
Uses the revenue, margin and costs from the P&L above.
| Month | Profit | Cash in | Cash out | Closing cash |
|---|
Lowest cash, while profitable
-
Why this matters more than the margin
Look at the two tables together. Every month is profitable, and the account still goes below zero, because you pay for the sale before you're paid for it. That hole is real money you have to find somewhere: savings, a loan, a line of credit, or an investor.
The faster you grow, the deeper it gets, because every new month of sales needs its costs paid before its cash comes in. That's why a company can grow itself out of business while its P&L looks better every month.
A P&L is one page of three. The balance sheet holds the money customers owe you, and the cash flow statement shows where your cash actually went. You need all three to see this coming.
What the full model adds
- The balance sheet and the cash flow statement next to your P&L, all three linked, so a change in one moves the other two.
- Receivables on the days your customers really take to pay, and payables on the terms you really have.
- The month your cash sits lowest across the whole plan, and how much you'd need to raise to stay above zero.
- A loan or a line of credit that fills the hole, with the interest showing up in the P&L where it belongs.
Building a plan is free. Saving it to an account, the Excel workbook and the print pack come with a paid plan. The pricing page lists what each one holds.