Learn how to present your work to clients effectively with our guide to understanding profit and loss statements and P&L reports for better business decisions.
Every company operates to earn money and increase its market value. Startups aim to grow revenue, while corporations focus on reducing costs. Regardless of size, every business has a Profit and Loss Statement (P&L) — a report that shows the company’s income and expenses over a specific period. It shows how much the company earned, how much it spent, and what profit remained.
Total revenue is the amount customers must pay for all services rendered for a defined period. It is calculated based on the time worked on projects (Value Time Fact) and converted into money. Invoices can be issued to customers according to different scenarios, depending on the agreements and the work model. It is important to remember that if, due to error or carelessness, part of the time worked is not considered in the invoice, the company loses money.
Cost of sales is how much it costs the company to complete client projects. This includes the salaries of the teams that directly do the work accepted by the client and paid for. The total cost of service delivery for the entire company is the sum of actual labor costs (Cost Grade Fact) of each project, converted into money. The company loses money if the Cost Grade Fact for any project is higher than what can be billed to the client (Billable Grade Fact). In this case, fewer funds are left for other essential expenses — selling, general, and administrative (SG&A).
Gross profit remains with the company after it has covered the cost of sales, that is, the salaries of production teams and related costs. Simply put, this is the company’s raw profit before any further deductions.
There is an important indicator — Gross Profit Margin. It shows what percentage of revenue remains as gross profit. Industry benchmarks, such as from the CSIMarket report, show an average gross profit margin of 45-50% for software companies; that is, half of all revenue should stay after paying for production. This figure is not pulled out of thin air — it is based on several years of data and corresponds to the average market level. This level of profitability is considered sufficient for the company to operate and grow sustainably.
SG&A — general company expenses for:
Income tax — corporate taxes and losses on cash logistics.
Net profit — the company’s net profit for the reporting period. Directed to reserves, bonus funds, and investments.
Once a company has a P&L statement, it needs to analyze it correctly to gain insight into the critical financial information about the business. Through analysis, business stakeholders can make effective strategic decisions, attract investors, and improve their financial health.
There are several key steps to analyze an income statement:
Understanding the structure and key components of the income statement, as well as the period that the P&L statement covers — month, quarter, or year.
Benchmarking, which includes the company’s financial performance against competitors in the same industry. Thanks to this, the company can identify dominant trends in the industry, identify its strengths and weaknesses compared to its competitors, and highlight areas for improving its operations.
Horizontal analysis, where analysts compare the organization’s income statement for the current period with statements for previous periods. At this stage, companies can assess the growth they have recently achieved and identify key trends related to profitability, expenses, and revenue.
Analyzing key ratios such as return on equity, debt-to-equity ratio, and return on sales allows an organization to gauge its profitability and understand how effectively it generates revenue through shareholders’ equity and how debt affects the organization's ability to make a profit.
When our team works with small companies, it helps them grow. When it works with large corporations, it optimizes their costs. In both cases, it’s important to understand which revenue or expense category our contribution falls into — in other words, which line of the client’s profit and loss statement report our work will appear on. This helps not only to make a good product but also to show what value it creates in monetary terms.
If we make a product for a startup, for example, like for one marketplace app development project for a Berlin-based startup, we offer solutions that help the client earn more. For example, our team implemented push notifications to re-engage users, encouraging them to return and ultimately boosting sales. In another case, we created new landing pages for an existing product, which are quickly generated and allow new marketing campaigns to launch, enhancing profitability by accelerating time-to-market.
Sometimes, it’s not just what you build, but how you frame it. In one case, the client treated a €3,000 per year AI tool as a costly SaaS subscription, comparing it to other tools in the “subscriptions” line. But once we reframed it as a junior assistant under the “personnel” cost category, the perception changed: paying €250 per month for an always-available teammate didn’t seem expensive anymore. This shifted the discussion from cost to value — and unblocked the decision. It’s a small example of how understanding profit and loss statements can support smarter business thinking.
We work with corporate clients differently — through improvement and optimization. In a project dedicated to the development of a nutrition platform for parents, comprising over 50 websites, we replaced the customer framework with our component approach, which reduced the cost of support considerably and allowed for 10 times faster time-to-market for new websites.
Sometimes, the biggest value we provide is helping decision-makers see the real cost structure behind a project. One corporate client was evaluating whether to invest in test automation for their Drupal-based infrastructure. Initially, automation costs were seen as a “tech experiment” — vague and hard to justify. We helped them structure it as a CapEx line with clear projected savings in their cost of sales: reduced QA headcount, fewer rollbacks, and faster release cycles. This positioned the project not as an expense, but as a long-term investment in efficiency with a 12–18 month ROI horizon. In this case, understanding P&L reports helped reframe an initiative as a strategic move with measurable profit.
Client satisfaction directly depends on how we present the results of our work. It is not enough to simply deliver a feature or launch an update — it is important to explain what specific benefit this has given to the business. You need to speak the language of money, growth, and efficiency. Because clients don’t buy code, they buy outcomes.
Practical advice: make a simple, clear slide. Show what has changed. Add before/after charts, traffic, conversion, and sales figures. Use plain language in your slides: “This saved you $X/month” or “This helped you grow revenue by Y%.”
If you need help with a project, contact us. We will not just do the task, we will bring you benefits.
