Understanding Your Profit & Loss and Balance Sheet (Without the Jargon)
Your financials shouldn’t feel like a foreign language.
Running a business is hard enough—keeping up with marketing, staffing, operations, and customers. But when it comes to your financial statements, many business owners freeze. If you’ve ever looked at your Profit & Loss or Balance Sheet and felt completely lost… you’re not alone.
In fact, 40% of small business owners say they’re financially illiterate, and over 60% feel unsure about the state of their business finances.
That’s why Kelli created this simple, practical walkthrough to help you understand your numbers and take back control.
What Is a Profit & Loss Statement (P&L)?
Think of your Profit & Loss Statement (also called an Income Statement) as a report card for your business over a specific time period—usually monthly, quarterly, or annually.
It tells you:
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How much you made (revenue)
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How much you spent (expenses)
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And what’s left (profit or loss)
In simple terms: Are you making money, or are you losing money?
Your P&L helps you spot trends, control costs, and see whether your pricing or sales efforts are actually working.
What Is a Balance Sheet?
Your Balance Sheet is a snapshot of your business’s financial health at a single point in time.
It shows you three things:
- What you own (Assets)
- What you owe (Liabilities)
- What’s left over (Owner’s Equity)
Formula to remember: Assets = Liabilities + Equity
This report tells you how stable your business is and if you have enough cushion to handle a slow month or make a big investment.
Why These Two Reports Matter Together
Your P&L shows performance over time.
Your Balance Sheet shows stability at a moment in time.
When used together:
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You can make smart decisions about hiring, growth, and cash flow.
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You’ll be more confident when speaking to banks, investors, or tax pros.
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You’ll avoid surprises and sleep better at night.
Common Mistakes Business Owners Make:
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❌ Not reviewing reports monthly
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❌ Looking only at bank balance instead of actual profit
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❌ Confusing cash flow with net income
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❌ Forgetting to track owner draws or credit card balances
Ready to Take Control?
You don’t need to be an accountant, but you do need to understand your numbers. Watching a 20-minute video like this one could be the best investment you make this month.
Watch Kelli’s webinar to feel more confident and empowered about your business finances.
Whether you’re just starting out or five years in, it’s never too late to build your financial literacy!
If you’re already a client of Franchise Resource email your dedicated CSA with any questions or email us at info@FranchiseResourceLLC.com
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