A profit and loss account (P&L) template is important whether you are running a business or in the process of setting one up.

If the latter, as a part of P&L forecasting, it forms a required part of a business plan.

A P&L account will show you what your business’ income and expenses are so you have a clearer idea of your trading history over a certain period of time.

What is a profit and loss template?

A P&L template shows:

• Business performance over a specific period of time
• Recorded incomings and outgoings
• Sales income generated, including estimates of work in progress but not yet invoiced.

A P&L statement is usually prepared annually and shows revenues and costs and how much profit has been made over the period. “This timeframe provides a comprehensive view of your business’ financial performance and allows for adjustments based on yearly cycles and market changes,” said Harvey Morton, founder of Harvey Morton Digital.

It should form part of your overall bookkeeping set of documents – along with a balance sheet and cashflow forecast.

For limited companies, and sole traders earning over £50,000 a year, a profit and loss statement is required for HMRC.

It’s not just a legal box-ticking exercise either. It’s insightful for you. “In the current economic climate, this forecasting process can be vital in giving business leaders the oversight needed to confidently make decisions about profitability and planning for future budgets and financial scenarios in the long term,” said Oliver Finch, business outsourcing partner at Menzies LLP.

Why do I need a profit and loss document?

When it is completed properly a P&L paints a clear picture of your company’s financial performance, according to Michael Baron, commercial director of BWS: “Despite the name, a P&L goes far beyond showing the profit and loss; it shows how efficiently that company generates revenue and manages its expenses,” he told Small Business. “A P&L document is vital for internal decision-making and future growth, as well as playing a key role in external communication with investors, creditors and regulators by showing a company’s financial health.”

What should be in my profit and loss document?

A profit and loss statement will typically be made up of three main sections:

• Revenue (Sales): This section shows the total income generated by the business from selling its products or services.
• Cost of goods sold (COGS): This section reflects the direct costs associated with producing the goods or services sold. It includes raw materials, labour, and other expenses directly tied to making the product.
• Expenses: This is the most detailed part of a P&L as it captures all the indirect costs that are required to run a business. Expenses can be broken down into further subcategories such as:
  • Selling, general and administrative (SG&A): This includes expenses related to marketing, advertising, rent, salaries that aren’t included in COGS, utilities, and other general operating costs.
  • Research and development (R&D): This reflects expenses on developing new products or services.
  • Interest Expense: This includes any interest paid on loans or other forms of debt.
  • Taxes: This section shows the amount of income tax the company owes.

How long should my profit and loss statement be?

There’s no set page length for a profit and loss statement, explains Baron. What really matters is that it is concise and informative, striking a balance between showing enough detail and being easy to understand. “Many P&L statements fit on a single page, but some may require two pages depending on the complexity of the business,” he said.

What matters even more than length is the level of detail included. “A profit and loss forecast should take into account major revenue and expense categories but avoid excessive items that clutter the bigger picture,” said Baron. “The detail may also vary depending on the audience. For example, an internal management P&L may require a more detailed breakdown, whereas investors would prefer a simplified version.”  

For those companies that experience seasonal variations, it’s advisable to also forecast on a quarterly basis, advises Jonathan Cooper, founder and director of The Director’s Helpline. “This approach helps in managing cashflow during leaner quarters, ensuring that regular overheads are covered even when revenue is lower,” he said.

Use the templates below to build your own profit and loss account.

PDF profit & loss account template examples

• Click here to download the profit and loss PDF template for companies with under £90,000 turnover. Click here to download the profit and loss PDF template for companies with over £90,000 turnover.

XLS template examples

• Click here to download the profit and loss XLS template for companies with under £90,000 turnover. Click here to download the profit and loss XLS template for companies with over £90,000 turnover.

The templates have been produced to be in line with HMRC reporting requirements for self-employed professionals. The numbers are for illustration purposes only and completely random.

Here’s a bit more detail about each element.

Sales

All income from sales should be added for the period the P&L is being prepared for, whether or not your have received payment.

Sales with no received payment should be added to the debtors account in your balance sheet.

Cost of sales

Includes any direct costs involved in making and selling the product purchased, including the wages of  those involved in making the product and purchases made from suppliers for goods or raw materials used in the accounting period.

Overheads

Includes general expenses and all other costs you have been invoiced for during the period, such as: rent, rates, professional fees, vehicle costs, national insurance and pensions, utilities, etc. Items invoiced for, but not yet paid, are added to your creditors account on your balance sheet.

Depreciation

It is a judgment call on how long a period fixed assets should be depreciated over but be consistent in your application of it.

Looking to easily track you profits and losses anywhere and anytime?

We recommend using one of these accounting tools:
 

Further reading on accounting and managing cashflow

• How to manage your accounts as a small business
• How the perception of accounting is changing
• Calling in your debts and chasing late payments 

Looking for finance? SmallBusiness.co.uk is working in partnership with trusted lenders to help you find the best business funding deals. Find out more here.