Learn as you go · Free lesson
Understand your profit & loss result
Start with the calculator above. Then follow the example below, one step at a time.
What this calculator does
A busy business can bring in plenty of sales without leaving much money behind. This calculator separates what you earn from what it costs to earn it, so you can see a profit or loss for one period.
Use it for a month, quarter or year. Keep every input within the same dates, and use your records rather than your bank balance alone. This is a planning check, not a replacement for bookkeeping.
How it works
Revenue means sales before business costs. Direct costs are tied to the products or services sold, such as ingredients used in bakery orders. Subtract them from revenue to find gross profit: the amount left to cover the rest of the business.
Operating expenses keep the business running, such as rent, insurance and software. Subtract those next. Then add other business income and subtract the interest and income-tax expense recorded for the period. Only include costs once. A tax reserve you choose to save is not the same as a recorded tax expense.
Net profit = sales revenue − direct costs − operating expenses + other income − interest expense − income-tax expense.
Worked example
Example only. These are fictional business numbers, not recommended targets.
- Example: Cami’s fictional bakery records $8,400 in sales for one month, after refunds and excluding sales tax collected.
- Direct costs are $2,300. Subtracting them leaves $6,100 in gross profit: $8,400 − $2,300.
- Rent, staff costs and other operating expenses total $3,200. That leaves $2,900 in operating profit.
- With $120 of interest, no other income and no income-tax expense entered, net profit is $2,780. Total entered costs are $5,620.
- Net margin is about 33.10%: $2,780 ÷ $8,400 × 100. That means about $33.10 remains from each $100 of sales after the costs included here—not that $2,780 is all ready to withdraw.
How to read your result
A positive number means income exceeded the entered costs. Zero means they matched. A negative number means costs were higher than income. One loss-making month is useful information to investigate, not a verdict on your ability to run a business.
There is no single healthy margin for every business. Compare your own periods using the same cost categories. Check whether a change came from price, sales volume, supplier costs or an unusual expense before choosing a response. An incomplete cost list can make the result look better than it is.
Common mistakes
- Mixing a full month of sales with only one week of costs.
- Counting a cost in both direct costs and operating expenses.
- Entering loan repayments as interest when part repays the borrowed balance.
- Treating unpaid sales or a tax set-aside as money ready to spend.
FAQ
Is revenue the same as profit?
No. Revenue is sales before costs. Profit is what remains after the costs included in the calculation.
Why is my bank balance different?
Some customers may not have paid yet, and some cash payments may not be expenses in this profit figure. The Cash flow calculator helps you explore that difference.
What if I made no sales?
You can still see the loss from your entered costs. Margin is not shown because dividing by zero sales would not give a meaningful percentage.
Should I enter my owner withdrawal as a cost?
An owner withdrawal is not automatically an operating expense. Use the categories in your records and ask your bookkeeper if you are unsure how your own pay is recorded.
Can this tell me my tax bill?
No. It uses the income-tax expense you enter and does not work out what you owe. Ask a qualified professional which figure belongs in your records.
Related calculators and guides
Educational estimates based on your inputs. Not financial, tax, or legal advice.