There’s a lot of talk online about how much entrepreneurs are making. You’ll see claims of “6-figure businesses,” “multiple 6-figure businesses,” and even “7-figure businesses.” But these numbers can be deceiving because they don’t tell you anything about profit.

Earning $700,000 in revenue might sound impressive, but if it cost $950,000 to generate those sales, it’s a completely different story.

Profit is what really matters, so let’s break down how to calculate it (or spot a loss) and three simple ways to make tracking it easier and maybe even fun!

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I’m Amelia, a Toronto-based accountant dedicated to supporting women-owned businesses. My main purpose is to help you know your numbers, increase profits, and avoid mistakes when it comes to the numbers side of your biz.

Whether it’s taking it off your plate, helping you DIY with ease with our Small Biz Starter Pack, or increasing your financial awareness—I’m here to make it simple.

Be sure to sign up for free monthly bookkeeping & tax reminders sent straight to your inbox to be sure you stay on track and never miss a deadline.

How to Calculate Profit and Why It Matters More Than Sales

Profit is one of the most important numbers in your business, and understanding it is easier than you might think. Making sales is great, but without profit, your business won’t survive.

Unless you have endless funds to keep your business afloat, you need to be making more than you’re spending otherwise it’s just a matter of time before things fall apart, and we don't want that.

Simply put, profit is what you're left with after you pay for all the costs of doing business. It's sales - costs = profit. If your costs are higher than your revenue, you’re running at a loss. Bookkeeping software automatically generates a Profit and Loss Statement for you, making it easy to track your profits. If you’re not using one, you’ll need to come up with a system to track profits yourself.

Do you know what your profit is? If not, that’s the first thing to figure out before you can increase (or start making) profits in your business.

Most small businesses fail, but you can avoid that by getting serious about your numbers. Tracking your sales, expenses, and profit (or loss) helps you make informed decisions, adjust where needed to increase your profits so the doors to your business stay open!

Tip 1: Keep it separate

The first step to tracking your profits simply is to keep things separate. Opening a dedicated business chequing account and using it exclusively for business transactions is the best way to do this. This creates one clear place to manage all your sales and expenses.

Business can get complicated with various payment methods, but don’t overthink it.

For example, if you accept PayPal, make sure the funds are going into your business account. The same goes for Shopify payout, link your business chequing account to receive deposits. And if you're using Stripe, connect it to your business account as well.

The same goes for your costs. Set up all recurring payments through your business chequing account and make sure you’re using your business debit card for one-off purchases when you're on the go. For example, if you’re at Indigo buying both personal items and office supplies, separate the transactions and use the right card for each.

It doesn’t have to be expensive or complicated. Whatever system you choose, the key is to keep everything separate.

Tip 2: Have a system in place

Knowing your numbers is key to increasing profits, but it should be quick and painless, without taking time away from income-generating tasks. No one has time to manually tally costs every month. Thankfully, there are systems and software to make this process easy, so you can effortlessly keep track of your numbers.

I’m a big fan of bookkeeping software because it can do a lot of the work for you when set up correctly, though I understand some new entrepreneurs are hesitant because of the monthly fee. To me, the benefits far outweigh the cost. My current favorite is Xero. It integrates smoothly with PayPal and other apps, and it's really easy to use, even for those without an accounting background.

For entrepreneurs on a budget, I’ve also created a powerful Google Sheets template—Small Biz Starter Pack. It has a tab for each month where you simply input your sales on one side and costs on the other. You can categorize each cost (e.g., office supplies, utilities, phone), and the sheet will automatically calculate your total sales, sum up costs by category, and show your profit or loss for the month.

Tip 3: Do your bookkeeping every month

The best way to track your profits is to do it monthly. I know it’s easy to fall behind and push it aside, but checking in on your profits (or losses) each month can really help you adjust your strategy and increase profits. It’s super important to stay on top of your books each month.

Letting things pile up can lead to feeling overwhelmed, making it even harder to catch up. And as an entrepreneur, you can’t succeed when you’re drowning in overwhelm so make sure you’re staying on track every month.

If you're looking for a way to be held accountable and stay on track monthly, sign up for free monthly bookkeeping & tax reminders. Each month, you get reminders to set your goals, track your progress and important tax deadlines for the month.

What’s next?

It’s time to put what you’ve learned into action! If you don’t already have a separate business checking account, that’s your first step. Then, set aside some time to catch up by recording your sales and costs up to this point. Finally, get on track monthly so you can start seeing your profits and using the story the numbers tell you in order to increase them and live the life you dream of, are capable of, and deserve.

Make sure to stay connected and grab my signature profit margin guide. A simple tool designed to help you take the overwhelm out of figuring out what to look for when reviewing your number. Download it here.