Understanding whether your business is currently profitable is one of the most important parts of effective financial management. Yet, a recent Xero survey (October 2025) found that nearly two in five small business owners (38%) don’t know if their business made a profit last month.
That’s a surprising statistic — especially when modern cloud accounting makes it easier than ever to stay on top of your numbers.
At Bidwell Accountancy Ltd, we know that clarity is key to confidence. That’s why, during these challenging times, we’ve taken the time to review client data and accounting details to ensure everything is accurate and meaningful. We’re also sending out clear financial reports to our clients, helping them gain a better understanding of the numbers within their business — and ultimately, make more informed decisions.
Let’s take a look at how you can better understand profitability and what those numbers really mean.
1️⃣ What is Gross Profit?
Your gross profit is the money left over once you’ve deducted the direct costs of making or delivering your product or service.
In simple terms:
Revenue (income) – Cost of Goods Sold (COGS) = Gross Profit
COGS includes things like raw materials, direct labour, and packaging. A healthy gross profit shows you’re managing your pricing and production efficiently — the first sign your business model is working effectively.
2️⃣ What is Net Profit?
Your net profit, sometimes called the “bottom line,” is your true profit after all remaining costs and taxes are deducted.
You calculate it by taking your gross profit and subtracting every other operational and administrative expense — things like rent, salaries, utilities, marketing, and tax.
Your net profit shows the overall financial success of your business model once every cost is taken into account. It’s the ultimate measure of whether your business is truly sustainable.
3️⃣ Using Your P&L Report to Measure Profitability
Your Profit & Loss (P&L) report, also known as the income statement, is your financial “report card” for a given period (month, quarter, or year).
It starts with total revenue, deducts COGS to show your gross profit, and then subtracts other expenses to reveal your net profit.
With today’s cloud accounting platforms like Xero, QuickBooks, or Sage, you can easily run regular P&L reports or even add profit metrics to your dashboard.
Regularly reviewing your P&L helps you to:
✅ Spot financial trends early
✅ Identify areas where costs are too high
✅ Track performance and plan strategically
4️⃣ Bidwell Accountancy Can Help You Stay on Track
At Bidwell Accountancy, we believe every business owner should understand their numbers — not just record them. We help clients set up meaningful profit metrics and key performance indicators (KPIs), so they can see at a glance whether their business is running profitably each month.
In these uncertain times, knowledge really is power. By staying informed, you can make confident, data-driven decisions to protect and grow your business.
📞 To find out how we can help you better understand your financial position, contact us today:
📞 01908 380391
or e-mail
🌐 info@bidwellaccountancy.com
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