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What’s an Income Statement?

By August 13, 2025Glossary, I

An income statement (aka P&L) shows how much money your business made or lost over a period of time. It tracks what you earned, what you spent, and what’s left over.

In this article we will discuss how SaaS companies manage income statements.

Real Example

A SaaS company runs their Q3 numbers:

  • Revenue: $3.2M

  • Cost of Goods Sold (COGS): $400k

  • Gross profit: $2.8M

  • Operating expenses: $1.9M

  • Net income: $900k

That’s a clean, profitable quarter. This is exactly what the income statement lays out.

Why It Matters (Especially for SaaS)

The income statement is your scoreboard. It shows:

  • How customer contracts are converting into actual income

  • The impact of churn and expansion on top-line growth

  • How expenditures on sales, R&D, and ops are impacting profits

You can’t steer your company if you don’t know if you’re making or losing money.

What It Includes

Most SaaS income statements follow this structure:

  1. Revenue: Total earned from subscriptions, usage, services

  2. COGS: Hosting, support, and delivery costs

  3. Gross Profit: Revenue minus COGS

  4. Operating Expenses: Sales, marketing, R&D, admin

  5. Operating Income: What’s left after expenses

  6. Net Income: The final profit (or loss) after taxes and interest

Early stage companies can manage most of these details in QuickBooks or Xero.  As the company scales, specialized applications like Ordway for revenue tracking will be required.

Why You Should Care

Income statements are one of the three key financial statements that investors and boards will always ask for.  It’s usually the one they ask for first, and it is the one they examine the most closely, so you want to get it right.

Key Takeaway

Keep a close eye on your income statement.  It’s one of the most important lenses through which you can understand topline growth and bottom-line results.  Review it regularly.

Frequently Asked Questions

Is an income statement the same as a P&L?

 Yes. “Profit and Loss” and “income statement” are used interchangeably.

How often should I prepare one?

Monthly for internal use. Quarterly for board and investor updates.

What’s the difference between an income statement and the cash flow statement?

The income statement tracks earnings and expenses on an accrual basis. Cash flow shows when money actually moves in or out.