A P&L (profit and loss) statement, also called an income statement, summarises a company's revenues, costs, and expenses over a specific period. It shows whether the business made a profit or loss, and is the primary financial statement used by FP&A teams for performance analysis and planning.
In Depth
The profit and loss statement is the single most important financial report for FP&A teams. It tells the story of how a business generates revenue, what it costs to deliver products or services, and what remains after all expenses — the bottom line.
A typical P&L is structured in layers. Revenue sits at the top, followed by cost of goods sold (COGS) to arrive at gross profit. Operating expenses — salaries, rent, marketing, technology — are deducted to reach operating profit (EBIT). Below the line, interest, tax, depreciation, and amortisation adjustments lead to net profit.
FP&A teams work with P&Ls at multiple levels of granularity. A consolidated P&L shows the entire company. Departmental P&Ls break performance down by team. Product or segment P&Ls reveal which business lines are profitable. Entity-level P&Ls are essential for multi-entity groups, particularly when preparing consolidated accounts.
Budgeted P&Ls set financial targets for the year ahead. Forecast P&Ls are updated monthly or quarterly to reflect the latest expectations. Variance reports compare actual P&L results against both budget and forecast, highlighting where the business is ahead or behind plan.
For UK companies reporting under FRS 102, the income statement format follows specific presentation requirements. However, for internal management reporting and FP&A purposes, companies typically use a more detailed format that breaks down costs by department and cost category, providing the granularity needed for effective planning and control.
Real-World Example
A Birmingham SaaS company runs departmental P&Ls for engineering, sales, marketing, and G&A. The monthly board pack shows a consolidated P&L with actual vs budget columns, revealing that while revenue is 3% ahead of plan at £420K, operating expenses are 7% over budget due to unplanned contractor costs in engineering, resulting in operating margin compression from a budgeted 18% to an actual 14%.
Related Terms
A balance sheet is a financial statement that reports a company's assets, liabilities, and sharehold...
Revenue is the total income generated from the sale of goods or services before any expenses are ded...
Gross profit is the absolute amount of profit remaining after deducting the cost of goods sold (COGS...
Operating expenses (OpEx) are the ongoing costs incurred in running a business's day-to-day operatio...
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is a profitability metric t...
Net income, also called net profit or the bottom line, is the total profit remaining after all expen...
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