How to Create a Profit & Loss Statement

Start with a separate bank account

If you take only one thing from this article, let it be this: open a dedicated business checking account and run all business income and expenses through it. Mixing personal and business transactions in one account is one of the fastest ways to create a bookkeeping headache — and it makes building a clean profit & loss report much harder than it needs to be.

A separate account gives you a single source of truth. When it's time to pull together your P&L, you can export your bank transactions and categorize them instead of hunting through personal grocery runs to find that one massage-table supply purchase.

Keep your records tidy

Hold on to invoices, receipts, and supporting documents for at least three years. You will not need to hand every receipt to your tax preparer — in fact, a well-kept P&L and your bank statements are usually enough for tax preparation — but the IRS can request documentation if they ever audit your return. Having organized records means you can respond calmly and quickly instead of scrambling through shoeboxes.

A simple digital folder system works great: one folder per year, with sub-folders for income, expenses, and contracts. Snap photos of paper receipts or ask vendors to email them. The goal is "good enough to find in five minutes," not museum-quality archiving.

What a profit & loss statement looks like

A P&L (also called an income statement) is simply a list of what your business earned and spent over a period of time — usually a month, a quarter, or a full year. It follows a clean structure:

Income (Revenue)
All the money coming into your business from the work you do.
Cost of Goods Sold (COGS)
Direct costs tied to delivering your service or product — for example, the wholesale cost of oils or lotions you sell to clients. Many service-based wellness businesses have little or no COGS.
Gross Profit
Income minus COGS. This shows how much you have left to cover operating costs.
Operating Expenses
The regular costs of running your business — rent, software, insurance, supplies, and so on.
Net Income (or Net Profit)
Gross profit minus operating expenses. This is the bottom line: what your business actually earned.

Common income categories for wellness businesses

Group your revenue into clear buckets so you can see which parts of your practice are thriving. Here are categories that fit most wellness practitioners:

Individual sessions — one-on-one massage, therapy, coaching, or bodywork appointments
Packages or memberships — bundled session sales or recurring monthly plans
Workshops & classes — group events, training sessions, or special offerings
Retail product sales — oils, tools, books, or other items sold to clients
Gift certificates — track these when they are redeemed, not when they are purchased
Other income — affiliate commissions, sublease income from your studio space, or grants

Common expense categories for wellness businesses

Consistent categories make your P&L easy to read and help your tax preparer spot every deduction you are entitled to. Here are the typical ones:

Rent or studio space — monthly rent, co-working fees, or a percentage of home-office utilities if you work from home
Supplies & materials — linens, oils, lotions, cleaning products, and small equipment
Professional insurance — liability and malpractice coverage
Continuing education — workshops, certifications, conferences, and training materials
Software & subscriptions — scheduling apps, bookkeeping tools, email marketing, and payment processors
Marketing — business cards, website hosting, social-media ads, and photographer fees
Professional fees — bookkeeping, accounting, or legal help
Meals & travel — business-related meals and mileage or transit to off-site appointments
Phone & internet — the business portion of your cell and internet bills
Bank & merchant fees — monthly account fees and credit-card processing charges

A simple example P&L

Here is what a basic profit & loss statement might look like for a solo massage therapist over one year:

Income
Individual sessions	$48,000
Package sales	$12,000
Retail products	$3,000
Total Income	$63,000
Cost of Goods Sold
Retail product costs	$1,200
Gross Profit	$61,800
Operating Expenses
Rent	$9,600
Supplies	$2,400
Insurance	$1,200
Continuing education	$1,800
Software & subscriptions	$1,200
Marketing	$800
Professional fees	$1,500
Phone & internet	$600
Bank & merchant fees	$480
Total Operating Expenses	$19,580
Net Income	$42,220

Building your own P&L

You do not need fancy software to start. A simple spreadsheet with columns for Date, Description, Category, and Amount will do. At the end of each month (or quarter), sort your transactions by category and add them up. Over time, you will spot patterns — which services bring in the most revenue, where your money is going, and whether your profit margin feels healthy for the effort you are putting in.

If you outgrow the spreadsheet, tools like Wave, QuickBooks, or FreshBooks can automate much of this and generate a P&L with one click. The important part is to start now, even if it is simple. A rough P&L you actually use beats a perfect one you never build.

Need help getting started?

If bookkeeping feels overwhelming, you are not alone — and you do not have to figure it out by yourself. Allium Tax helps wellness business owners get their records organized and keep them that way, whether through a one-time clean-up or ongoing support.

Get in touch or book a consultation and we will help you build a system that works for your brain and your business.