How to Use Your P&L to Create a Budget
A step-by-step guide to turning your past numbers into a smart plan for the future
If you’re running a small business and feeling like your money is all over the place, there’s one report that can bring it all into focus:
Your Profit & Loss Statement.
Also called a P&L or income statement, this report is more than just a snapshot of your past, it’s a powerful tool for building your future.
In this post, we’ll walk through exactly how to use your P&L to create a simple, effective budget for your business.
Step 1: Understand What’s in Your P&L
Your Profit & Loss shows your business’s:
Revenue (aka sales or income)
Cost of Goods Sold (COGS) (if applicable)
Gross Profit (Revenue – COGS)
Operating Expenses (like rent, software, marketing, etc.)
Net Profit (your bottom line after expenses)
This report tells you how much your business is actually earning vs. spending and that’s the perfect starting point for a realistic budget.
Tip: Run your P&L in QuickBooks for the last 12 months to get a full picture of your business performance.
Step 2: Review Monthly Averages
Budgets work best on a monthly basis. So take your last 12 months of data and break it down:
What was your average monthly revenue?
How much did you spend on marketing, subscriptions, payroll, etc. each month?
Were there any seasonal spikes or slow periods?
Look for patterns. Did you overspend in certain months? Did your income fluctuate more than expected?
Step 3: Set Goals Based on Reality
Now that you’ve looked back, it’s time to look forward.
For each line item:
Revenue: Set a goal. Is your income growing? Do you want to increase it?
Expenses: Are there categories you can cut? Do you need to invest more in others?
Example: If you spent $400/month on software last year, but half of it was unused, you might budget $200 going forward.
Your P&L helps you make informed, intentional choices not guesses.
Step 4: Build Your Budget
Using your monthly averages and goals, create a simple budget with these categories:
Category - Monthly Budget
Revenue - $X,XXX
Cost of Goods Sold - $XXX
Gross Profit - Auto-calc
Owner’s Pay - $XXX
Marketing - $XXX
Software & Tools - $XXX
Subcontractors - $XXX
Misc. Expenses - $XXX
Profit Target - $XXX
You can do this in:
QuickBooks (Projects or Budgets section)
Google Sheets or Excel
A budgeting app built for business
Step 5: Review and Adjust Monthly
Your budget isn’t a one-and-done document, it’s a living plan.
Each month:
Compare your actuals vs. budget (QuickBooks can show this!)
Ask: Did I overspend? Underspend? Why?
Make adjustments as needed
This keeps you proactive instead of reactive and helps you stay in control of your finances.
Bonus: Use It to Set Profit Targets
Your P&L can also help you figure out:
How much you need to earn to pay yourself more
How much you can afford to reinvest in the business
How much cash you need to set aside for taxes
Knowing your numbers = peace of mind + better decisions.
Need Help?
If you don’t know where to start with your P&L or you need help building a budget that actually works, I’ve got your back.
I offer a free Bookkeeping Health Check to:
Review your P&L in QuickBooks
Help you build a monthly budget
Set up simple systems to track your progress
Contact us by click here
or send us an email at David@RuckandReconcile.com
Check out our services here
Learn more about Ruck and Reconcile here
And as always, thanks for reading and we’ll see you next week!