What’s a P&L? A Quick Guide for Private Practice Owners

Embarrassed to Ask What a P&L Is?

You’re not alone.

Picture this: Your CPA or bookkeeper emails you your practice’s P&L (aka Profit and Loss Statement).

You open the file, stare at the numbers, and suddenly feel like you’re deciphering ancient hieroglyphs. Panic sets in, and you wonder, Am I the only business owner who doesn’t understand this stuff?

Answer: No!

The good news is these financial statements aren’t as intimidating as they seem. In fact, they’re pretty easy once someone shows you around.

And after you have a surface-level understanding, you may find a P&L to be one of the most powerful tools for understanding your practice’s financial health.

Sooo…

What Is a P&L?

The Profit and Loss Statement, often called the P&L or Income Statement, is like your practice’s report card. It summarizes your financial performance over a specific period—typically a month, quarter, or year.

Key Components of a P&L:

1. Revenue: All the money your practice earned.
2. Expenses: All the money your practice spent.
3. Net Income: Revenue minus Expenses—your bottom line.

If your Revenue is higher than your Expenses, congratulations—you’re profitable. If not, it’s time to analyze where your money is going and make adjustments.

While we’re talking about expenses, check out this article on what you can write off.

What Is a Balance Sheet?

If the P&L is your practice’s report card, the Balance Sheet is its financial snapshot. It provides a picture of your business’s financial health at a specific moment in time, typically the last day of a month, quarter, or year.

Key Components of a Balance Sheet:

1. Assets: What your practice owns (e.g., cash, furniture, accounts receivable).
2. Liabilities: What your practice owes (e.g., loans, credit card balances, unpaid bills).
3. Equity: The owner’s stake in the business. This is calculated as Assets minus Liabilities and represents your practice’s net worth.

Why These Financial Statements Matter

Understanding your P&L and Balance Sheet isn’t about impressing your CPA—it’s about using these tools to make better decisions for your practice.

1. Spot Trends

Regularly reviewing your P&L helps you identify patterns. Are revenues increasing? Are expenses climbing faster than expected? These insights can guide you in making proactive decisions.

2. Make Informed Decisions

Thinking about hiring a new staff member or upgrading your office? These statements reveal whether your finances can support those investments.

3. Reduce Stress

A clear understanding of your financials means fewer sleepless nights worrying about money.

What’s Your Role as a Private Practice Owner?

Your job isn’t to become a financial expert—it’s to understand the basics and ask the right questions.

•     Review Regularly: Schedule time to look at your P&L and Balance Sheet at least quarterly.
•     Ask Questions: Don’t hesitate to ask your CPA or bookkeeper for clarification on anything you don’t understand.
•     Delegate: Leave the detailed analysis to the professionals while you focus on what you do best—helping your clients.

The Bottom Line

Your P&L and Balance Sheet aren’t meant to confuse or overwhelm you—they’re simple tools designed to educate you.

By understanding these financial statements and working closely with a trusted CPA or bookkeeper, you’ll gain insights to grow your practice, avoid unnecessary stress, and make confident decisions.

Ready to get started? Open your latest P&L and Balance Sheet, take a deep breath, and begin exploring your financial picture. With the right support and a bit of curiosity, you’ll feel more confident in no time.