Profit and loss for a shop owner who hates accounting
The one-page P&L any shop can keep: sales, cost of goods, gross margin, the six expense lines that matter, and the three questions to ask it every month. No accountant required.
You know your takings. You probably know them to the nearest note, every night. What most shop owners don't know — honestly, month to month — is whether the shop made money. Takings went up; did profit? Rent went up; can the shop carry it? A supplier offered a discount for cash; is it worth the cash?
The answer to all of those is a one-page document called a profit and loss statement, and it is a great deal simpler than accountants make it look. Here is the version a shop needs, and nothing more.
The page
Five lines, in this order:
| This month | |
|---|---|
| Sales (net of returns and discounts) | 24,000 |
| Cost of goods sold | 17,280 |
| = Gross profit | 6,720 (28%) |
| Operating expenses | 4,900 |
| = Net profit | 1,820 (7.6%) |
Everything else is detail under one of those lines. If you keep only this page, kept honestly, you know more about your shop than most.
Line 1: Sales — net, not gross
What customers actually paid, after returns, refunds and discounts. A sale on credit counts as a sale the day it's made, not the day the money arrives — otherwise a month of generous credit looks like a bad month and the month they pay looks like a great one, and neither is true.
Line 2: Cost of goods sold — the line everyone gets wrong
Not what you bought this month. What you sold this month cost you. If you bought a month's worth of stock on the 30th, your purchases are huge and your sales are normal, and a purchases-based P&L says you lost money. You didn't; you have a shelf full of stock.
The honest way: every product has a cost price, every sale records it, and cost of goods sold is the sum of the cost of what went out the door. That's tedious by hand and trivial for software. By hand, the approximation is:
opening stock value + purchases − closing stock value
which needs a stock count at each end and is why the old way was annual.
Line 3: Gross profit and margin
Sales minus cost of goods. Expressed as a percentage of sales, it's your gross margin — the single most useful number about your shop. It tells you how much of every sale is left to pay for everything else. A shop with 22% margin and a shop with 34% margin are different businesses, even at the same takings.
Watch it monthly. A margin that drifts down with flat sales means prices haven't kept up with costs, or discounting has crept in, or the mix has shifted toward low-margin lines.
Line 4: Operating expenses — six lines, not sixty
Rent · Staff · Utilities and internet · Transport and delivery · Fees (bank, payment processing, licences) · Everything else.
Six categories. Not "stationery" as its own line; it's in "everything else". The aim is a page you will actually fill in, and sixty categories is how a P&L becomes a job you put off. The one rule: the owner's own drawings are not an expense — paying yourself is what the net profit is for, and mixing it in hides whether the shop can afford you.
Line 5: Net profit
What's left. As a percentage of sales it's small for most shops — 3% to 10% is typical for independent retail — which is precisely why the gross margin and the expense lines matter: a two-point slip in margin can halve the net.
The three questions to ask it every month
- Is gross margin holding? If it fell, was it price, discounting, or mix? Each has a different fix.
- Did any expense line jump? Compare to last month and the same month last year. Rent and staff should be boring; if transport doubled, why?
- Is net profit paying for you? If the shop's net profit over three months doesn't cover what you take out, the shop is shrinking, however busy it feels.
Fifteen minutes, the first week of the month, same time every month.
Common traps
- Cash in the till ≠ profit. The till is full because you haven't paid the supplier yet.
- A big purchase isn't a bad month. It's stock. See line 2.
- VAT isn't yours. If you charge tax, it passes through; sales and costs go on the page without it.
- Credit given isn't a loss — until it is. Keep the debtors book separately; when a debt is genuinely dead, write it off as an expense in that month, not by quietly forgetting it.
What this looks like in Shopman
- Profit & Loss is a report on the Starter plan and above: sales net of returns, cost of goods from the cost price on each sale, gross margin, expenses by category, net — for any period, on your phone.
- Expenses are logged as they happen, in the categories you choose, with recurring ones (rent, subscriptions) entered once.
- Profit by product and category (Professional) answers the "was it mix?" question: which lines earn, which sit.
- Inventory valuation gives the stock value at cost for the balance sheet question nobody asked but the bank will.
- Export any of it to PDF or Excel for your accountant, who will have far less to do.
Start free — fourteen days of Professional, no card
Frequently asked
What's a good net margin for a small shop? For independent retail, 3–10% of sales after all expenses but before the owner's drawings. Higher-margin trades (pharmacy, cosmetics, specialist goods) can run higher; grocery runs lower on higher volume.
Monthly or weekly? Monthly for the P&L. Weekly for takings, credit outstanding and low stock — those are operational, not financial.
Do I still need an accountant? For tax filing, probably. For knowing whether the shop made money this month, no — that's this page, and it's yours.