How to read your P&L in five minutes.

A P&L (profit and loss statement, or income statement) lists what came in and what went out over a period, usually a month. Read it top to bottom, and stop at five lines.

1. Net revenue

Start with net revenue: gross sales minus discounts and refunds. This is what customers actually paid you for products and shipping. Sales tax you collected isn't revenue; it belongs to the government, so it shouldn't be here.

2. Gross profit and gross margin

Subtract cost of goods sold (what the products cost you to make or buy) to get gross profit. Divide by net revenue for gross margin. In the example, $32,112 ÷ $45,248 = 71.0%. If gross margin is falling, check supplier prices and discounting first.

3. The costs of getting the sale

For an online brand, the next lines that matter most are advertising, payment fees and shipping. Together they decide how much of each sale you keep. Watch ad spend as a share of revenue: in the example, $7,905 ÷ $45,248 = 17.5%.

4. Operating expenses

Software, contractors, staff, rent and everything else that keeps the lights on. These grow quietly; a monthly look catches subscriptions nobody uses.

5. Net profit

What's left after everything: $15,299 in the example, a 33.8% net margin. This is the number to compare month to month. If it moved, the lines above tell you why.

Two checks before you trust it

• Is it reconciled? A P&L built from books that tie to your bank is real. One built from estimates may not be. Here's why that matters.
• Accrual or cash? Accrual counts sales when the order is placed; cash counts them when money arrives. For an online brand, accrual shows the true month; cash shows what hit the bank.

Metreks builds this P&L automatically, keeps it reconciled, and explains changes in plain words. See the reports.