At some point, someone hands you a profit and loss statement.
Maybe it's your accountant sending over the monthly report. Maybe it's NoCFO showing your financial overview. Maybe it's a potential investor asking to see "the P&L."
And you nod along, but secretly have no idea what you're looking at.
That's completely normal. The profit and loss statement — also called the income statement, or in Finnish tuloslaskelma — is one of the most useful financial documents in any business. But nobody teaches you how to read it unless you study accounting.
This guide fixes that.
What is a profit and loss statement?
The profit and loss statement (P&L) is a summary of your business's income and expenses over a specific period, typically a month, quarter, or full financial year.
It answers one essential question: did your business make money or lose money during this period?
Unlike a bank statement, which shows cash moving in and out, a P&L gives you a structured picture of your business performance. It separates revenue from costs and shows you where money is coming from and where it's going.
The basic structure
A P&L follows a standard structure, working from the top down. Here's how it flows.
1. Revenue (Liikevaihto)
This is the total income your business earned during the period. What you invoiced and received from customers. It's your starting point, sometimes called the "top line."
If you run a service business, this is the sum of all your invoices. If you sell products, it's the total value of products sold.
2. Cost of goods sold / direct costs (Muuttuvat kulut)
These are the costs directly tied to delivering your product or service. For a product business, this includes manufacturing costs, materials, and supplier payments. For a service business, it might include freelancer costs if you subcontract work, or specific tools used for a particular project.
Not every business has meaningful costs here. Many service businesses and freelancers will show minimal or no direct costs.
3. Gross profit (Myyntikate)
Revenue minus direct costs equals gross profit.
This tells you how much money is left after the direct cost of delivering your work. A healthy gross profit is important — it needs to be large enough to cover all your operating costs and still leave something at the end.
Gross profit margin varies widely by industry, but for service businesses it's typically high, often 70–90%.
4. Operating expenses (Kiinteät kulut)
These are your general business costs — the expenses you incur whether or not you have clients. They include:
- Rent or home office costs
- Software subscriptions
- Marketing and advertising
- Salaries (including your own, if you pay yourself through an Oy)
- Professional services such as accounting or legal fees
- Insurance
- Equipment depreciation
5. Operating profit / EBIT (Liikevoitto)
Gross profit minus operating expenses equals operating profit.
This is what's left from your business operations before financial items and taxes. It's one of the most important numbers in the P&L because it tells you whether your core business is profitable, independent of how it's financed or taxed.
EBIT stands for Earnings Before Interest and Taxes.
6. Financial items (Rahoituserät)
This covers interest paid on any loans and interest received on savings or investments. For most small businesses, this section is small or empty.
7. Profit before tax (Voitto ennen veroja)
Operating profit adjusted for financial items. This is what you'll pay tax on.
8. Taxes (Verot)
Corporate income tax (20% for limited companies). For sole traders, tax is calculated at the personal level rather than appearing in the company P&L.
9. Net profit (Nettotulos)
This is the bottom line. Revenue minus everything else equals net profit — or a net loss if the number is negative.
Net profit is what the business actually earned. What remains after all costs, interest, and taxes are accounted for.
How to actually use your P&L
Knowing the structure is one thing. Knowing what to look at is another. Here are the questions worth asking when you review your P&L.
Is revenue growing?
Compare this period to the same period last year, or the previous quarter. Is the top line moving in the right direction? If revenue is flat or falling while costs are rising, that's worth paying attention to.
What's your gross margin?
Divide gross profit by revenue and multiply by 100. If this number is shrinking over time, your direct costs are increasing relative to what you're charging — which might mean pricing needs to go up, or costs need to come down.
Are operating expenses under control?
Look at your cost line items individually. Is any category growing faster than your revenue? Are there subscriptions or services you're paying for that no longer make sense?
What's the profit trend?
One month's profit doesn't tell you much. Three or four months' worth starts to show a pattern. Is the business consistently profitable? Is profitability improving or declining?
Is the business making enough to sustain itself?
Net profit needs to be enough to cover your own income (if you're a sole trader drawing from profit rather than a salary), reinvest in growth, and build a cash buffer. If it's not, something in the revenue or cost structure needs to change.
A common point of confusion: profit vs. cash
Your P&L shows profit. Your bank account shows cash. These are not the same thing, and the difference trips up a lot of entrepreneurs.
Example: you invoice a client €5,000 in December. That revenue shows up in your December P&L — but the client pays in January. Your December P&L looks strong. Your December bank account doesn't reflect it yet.
This is why profitable businesses can still run into cash flow problems. A P&L tells you about performance over time. A cash flow statement tells you about money actually moving in and out. Both matter.
Reading your P&L in NoCFO
NoCFO generates your P&L automatically from your bookkeeping data. You don't need to build it manually — it updates as transactions come in.
You can view your income statement at any point, filter by period, and compare across months or years. The numbers are there when you need them, without waiting for a monthly report from an external accountant.
If something looks off — a cost category that seems high, or revenue that doesn't match your invoice records — you can drill down to the underlying transactions to see exactly what's driving the number.
Understanding your P&L doesn't require a finance degree. It requires knowing which questions to ask. Now you have the framework.
NoCFO generates your profit and loss statement automatically, updated in real time, no accountant required. Try it free →