How to read your Profit and Loss report
The structure of your Profit and Loss report and when to look at it
The Profit and Loss report (P&L) in Xero shows your income and expenses for any date range you choose.
The structure of the P&L
The top section shows your revenue (all sales invoices raised and approved). Below that are your direct costs, giving you gross profit. Then come your overhead expenses, giving you net profit. Net profit is what Corporation Tax is calculated on.
Using it month by month
Run the P&L monthly and compare it to the same month last year. If revenue is growing but net profit is flat, costs are rising faster than income. If a specific expense line looks unexpectedly high, click the figure in Xero to drill through to the underlying transactions.
💡 Good to know: The P&L is the most useful monthly health check for any business. A five-minute review at the end of each month will flag most problems early enough to address them before they become serious.
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