Why Most Contractors Don’t Look at Their P&L
The short answer: A QuickBooks Profit and Loss report has three main sections: Revenue (total income from jobs), Cost of Goods Sold (direct job costs like labor and materials), and Operating Expenses (overhead costs to run the business). Gross Profit is Revenue minus COGS. Net Profit is Gross Profit minus Operating Expenses. For trades contractors, net profit as a percentage of revenue should typically be 10–20%.
Why Most Contractors Don’t Look at Their P&L
Most HVAC, plumbing, and electrical contractors either avoid their QuickBooks Profit and Loss report entirely or open it and have no idea what they’re looking at. The result is the same either way — financial decisions made without the data to support them.
The P&L is the most important report in your business. This guide explains what each section means in plain English — no accounting degree required.
The Three Sections of a P&L
Section 1: Revenue
Revenue is every dollar that came into your business from jobs, service calls, installs, and any other income. In QuickBooks this is usually labeled Income or Revenue at the top of the report.
For trades businesses, this should match what you invoiced — not necessarily what you collected. If you have outstanding invoices, they’ll show as revenue even if the cash hasn’t arrived yet.
HCP + QBO note: If your HCP and QBO integration isn’t configured correctly, this number is likely wrong. Duplicate transactions and missing entries are the most common cause of revenue that doesn’t match what you actually earned.
Section 2: Cost of Goods Sold (COGS)
Cost of Goods Sold is what it cost you directly to do the jobs. For trades businesses this typically includes labor wages (not including overhead), materials, parts, and subcontractor costs.
Revenue minus COGS equals your Gross Profit. This tells you how much you made before paying for the business itself.
Section 3: Operating Expenses
Operating Expenses are the costs of running your business that aren’t directly tied to a specific job. This includes insurance, vehicle payments, software subscriptions, rent or office costs, marketing, and administrative costs.
Gross Profit minus Operating Expenses equals your Net Profit — what’s actually left after everything is paid.
Gross Profit vs Net Profit — Why Both Matter
Gross profit shows whether your jobs are priced correctly relative to direct job costs. Net profit shows whether your business is sustainable after all overhead. A trades contractor can have healthy gross profit but negative net profit if overhead costs are too high. Both numbers should be monitored monthly.
The One Number to Check Every Month
Net profit margin — your net profit divided by total revenue, expressed as a percentage. For HVAC, plumbing, and electrical businesses, a healthy net profit margin is typically between 10% and 20%.
If your margin is consistently below 10%, your pricing needs adjustment or your overhead is too high. If you don’t know your net profit margin, you’re running the business blind.
Two Signs Your P&L Might Be Lying to You
- Your HCP and QBO revenue numbers don’t match — meaning your income figures are inaccurate before you even start reading the report.
- You haven’t reconciled your books in months — meaning transactions are missing, duplicated, or miscategorized.
A P&L is only as useful as the accuracy of the data feeding into it. If your books aren’t clean, your reports aren’t trustworthy.
How Profit Clarity Group Helps
We help HVAC, plumbing, and electrical contractors build accurate QuickBooks books, fix their HCP + QBO sync, and learn to read their reports with confidence. Our monthly bookkeeping service includes a 30-minute numbers call where we walk through your P&L together every month.