What am I Looking at? Top Tips for Unscrambling the Numbers!

Katie Neuhold
2 days ago
3 min read

Financial reports can feel overwhelming, especially if bookkeeping isn’t your favourite part of running a business. But once you understand the key sections — and what they don’t show — you’ll make clearer, smarter decisions with confidence.

Here are a few simple tips to help you read your Profit & Loss, Balance Sheet, and BAS reports like a pro.

Profit & Loss (P&L)

1. It Usually Defaults to an Accrual Basis

Your P&L shows your income and expenses for a specific period. In most accounting software, it defaults to accrual accounting.

What is accrual accounting?

It records income when it’s earned and expenses when they’re incurred — not necessarily when the money actually hits or leaves your bank account.

Example:

Invoice sent in May, paid in June

Accrual: P&L shows the income in May
Cash: P&L shows the income in June

Accrual gives you a more accurate picture of month-to-month business performance.

2. Figures Are Excluding GST

This is a point a lot of business owners miss:

Your P&L shows sales and expenses excluding GST

That GST amount doesn’t just disappear — it’s sitting on your Balance Sheet as either:

GST you’ve collected from customers, or
GST credits for your expenses

It’s not income and it’s not an expense, so it doesn’t belong on your P&L.

3. Does Not Show Loan or Finance Repayments

The P&L will not show the full expense of repayments such as:

Car finance/loan repayments
Insurance premium funding
Other business loans or asset finance arrangements

Why? Because these repayments include components that aren’t “expenses” from an accounting perspective. They are a liability to the business and therefore can be found on the Balance Sheet.

So keep in mind:

If you're reviewing your P&L to understand your total expenses, make sure you mentally add your loan or finance repayments into the full picture of your outgoings.

Business Activity Statement, fondly referred to as BAS

4. Figures Include GST

When you look at your BAS totals, the numbers include the GST portion.

So your BAS sales and BAS purchases will always be higher than what you see on your P&L, because:

P&L = ex GST
BAS = inc GST

This catches a lot of business owners off-guard!

5. Your BAS May Be on Cash or Accrual Basis

The method you lodge your BAS under also affects the numbers.

Cash Basis BAS

You report GST when money actually moves — when you physically receive payment or pay a bill.

Accrual Basis BAS

You report GST when you issue an invoice or receive a bill, regardless of when the money changes hands.

Why does this matter?

Because your P&L and BAS reports may not match, but also the GST amount on the Balance Sheet may not be a reflection of the GST you need to pay the ATO at that time!

P&L is often on accrual
BAS might be on cash (especially for small businesses)
BAS includes GST, P&L does not

So some timing differences are totally normal.

Balance Sheet

6. Often overlooked, always Important

While most business owners focus on their Profit & Loss, the Balance Sheet is just as important — if not more. It gives you a snapshot of your business's overall financial health at a single point in time.

What the Balance Sheet Shows

The Balance Sheet shows three key things:

What your business owns
(cash, equipment, vehicles, stock, money owed to you)
What your business owes
(loans, credit cards, ATO debts, unpaid bills)
What you are owed
These are your accounts receivable — invoices you've issued that haven’t been paid yet.

Together, these give you a clear view of how strong or stretched your business is.

Why It Matters

Even if your P&L shows a healthy profit, your Balance Sheet might tell a different story — for example, high debt, unpaid invoices, or low cash reserves.

It’s a vital tool for understanding the true financial position of your business, not just whether you made a profit this month.