How to Read a Profit & Loss Report Accurately
How to Read a Profit & Loss Report Accurately
without being in the accounting or finance field
without being in the accounting or finance field
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Profit & Loss Reports Sound Boring? 🤔
Profit & Loss Reports Sound Boring? 🤔
They only sound boring… until you realise they hold the answer to whether your business is surviving or thriving.
A Profit & Loss Statement (P&L) is a powerful mirror that reflects the health of your business. The good, the bad, and the ugly.
📊 What Is a Profit & Loss Report?
📊 What Is a Profit & Loss Report?
Also known as an Income Statement, this report shows:
How much money your business earned (revenue)
How much was used to spent (expenses)
Whether you made a profit or loss during a certain period (usually monthly, quaterly or yearly)
It’s a snapshot of your performance & one glance at the right numbers can save you from major financial mistakes.
📌 Key Sections You Must Understand
📌 Key Sections You Must Understand
1. Revenue (a.k.a. Sales/Income)
This is the total amount you earned from your business activities before deducting any expenses.
🚨 Watch out if your revenue is increasing but your profit isn’t, something is bleeding money behind the scenes.
2. Cost of Goods Sold (COGS)
If you sell products, this includes the direct cost of producing or buying what you sell—like raw materials or supplier invoices.
📌 High COGS could mean you’re underpricing, or that supplier costs need renegotiating.
3. Gross Profit
Calculated as:
Revenue – COGS = Gross Profit
🔸 This tells you how efficiently your business produces/sells goods or services.
5. Net Profit (a.k.a. The Bottom Line)
This is what’s left after everything is deducted:
Revenue – COGS – Expenses = Net Profit
💰This is the number you want to focus on, especially when planning tax.
4. Operating Expenses
These are your day-to-day running costs:
Rent
Salaries
Marketing
Utilities
Subscriptions
📍 Track them closely. Even small leaks here can sink a ship over time.
Profit & Loss Statement Matters for Businesses, WHY?
Profit & Loss Statement Matters for Businesses, WHY?
Price with confidences
Clear margin per SKU.No more RM guesswork.
Never run dry
Spot cash dips 30 days early. Protect payroll and rent.
Cuts the waste
Kill low-ROI spend; Redirect to what actually grows revenue.
Bank-ready on demand
The exact report lenders ask for;Extract and submit, no hold-up.
Investor-ready
Numbers + narrative that signal discipline, acuracy and consistency.
TRANSFORM YOUR BUSINESS FROM
1. Stop Undercharging ~ See unit economics and price properly
(Per Unit/Product Type/Service Type)
Use a one-page cost sheet per product/service:
Variable costs (materials, fees, delivery)
+ a fair slice of monthly overheads
+ your target margin.
Working ~
Target Price = (Variable Cost + Overhead per unit) ÷ (1 − Target Margin)
Example: Variable RM25 + Overhead RM10 = RM35
(1 - 0.3) = 0.7
RM35 ÷ 0.70
= RM50.00
2. Start managing cash ~ forecast inflows & outflows
✅ Run a rolling 13-week cash forecast.
✅ Map weekly receivables, payables, payroll, tax (PCB/EPF/SOCSO/CP500), rent, and subscriptions.
3. Scale what works ~ double down on profitable channels & exit the rest
✅ Measure contribution margin by channel (e.g., TikTok Shop, Instagram, Shopee, referrals).
✅ Track RM margin after COGS, shipping, gateway fees, and advertisements expenses.
✅ Keep channels that compounds margin; cap or stop the ones that burn cash without payback.
4. Sail through paperwork & reports that ticks a banker's checklist
✅ Close books monthly.
✅ Keep a “bank pack” ready: last 12 months P&L, balance sheet, cash flow, AR/AP agings, bank statements, SSM docs, and latest tax filings.
✅ When financing is on the table, you’re upload-ready in minutes.
5. Signal credibility ~ clean statements creates real control
✅ Reconcile bank statements monthly
✅ Lock prior periods
✅ Number invoices sequentially
✅ Set maker-checker approvals for payments.
✅ Document policies (expense, pricing, credit)
👆 This is how you will look investable and audit-proof 👆
Start reviewing your P&L every month. Not yearly. Not "when your accountant emails you." Every month.
Need help?
I offer:
✅ Monthly financial reporting
✅ Custom management reports
✅ Bookkeeping & compliance advisory
💬 Get in touch with a free 30-minute consultation to discuss further
References & Sources
References & Sources
1. LHDN Official Website: https://www.hasil.gov.my
(For the latest updates on Malaysian tax laws, allowable deductions & compliance guides.)
2. MyTax Portal (e-Filing): https://mytax.hasil.gov.my
(Access to taxpayer login, CP forms, PCB info, and more.)
3. Altomate – Allowable Business Expenses (Malaysia):
https://altomate.io/my/blog/allowable-and-disallowable-expenses-in-malaysia-a-guide-for-business-owners
4. Investopedia – Semi-Variable Cost Definition:
https://www.investopedia.com/terms/s/semivariablecost.asp
5. Investopedia – Fixed Costs vs Sunk Costs:
https://www.investopedia.com/ask/answers/042015/are-all-fixed-costs-sunk-costs.asp
6. Vaia – Fixed and Sunk Costs Explanation:
https://www.vaia.com/en-us/explanations/business-studies/managerial-economics/fixed-and-sunk-costs/
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