Mercury logoThe logo for Mercury, featuring a circular emblem with abstract, interconnected swirling lines on the left, and the word "MERCURY" in clean, uppercase letters to the right.

SaaS income statement template

Looking for a snapshot of your SaaS business’s financial position? Generate an income statement in minutes with this free and easy-to-use template.
Access Template
decorative image of an income statement

How to use the SaaS income statement template

Tally your revenue

Start by entering your company’s total revenue within your desired time frame.

Subtract your costs

Gather your COGS (Cost of Goods Sold), such as cloud hosting, infrastructure, and support costs.

Know your net income

Finish populating the sheet and watch as your income statement appears.

Understanding your income statement

Zero in on your numbers

Sometimes called a profit and loss statement (P&L), an income statement can give you a pulse on your SaaS business’ financial health and allow you to track recurring revenue, manage expenses, and evaluate your growth over time.

Dive Into Your Income Statement
income statement generating valuable insights

Leverage learnings for long-term growth

Compare income statements over time to see if your SaaS business is on a path to profitability. An increase in revenue may indicate traction while a decrease in COGS may spell greater operational efficiency.

Analyze Your Numbers
comparing income statements

Understanding income statements

An income statement or profit and loss (P&L) statement is a financial document that shows how much a business has spent and earned over a specific period of time — usually a fiscal quarter or year. The statement is used to understand a company’s profitability and identify areas where cost savings can be made.

While every P&L differs based on the type of business, there are a few major categories you’re likely to find on most profit and loss statements:
  • Revenue. A P&L statement begins with revenue, or the money a business has earned from sales or other activities during the measured time period.
  • Cost of goods sold (COGS). COGS is what it costs your company to deliver its core service or product. This means direct expenses like web hosting and customer service. It doesn’t include operating expenses like rent or salaried employees.
  • Gross profit. COGS is subtracted from revenue to determine gross profit, or a business’s profit before accounting for operating expenses. A product that has a COGS of $10 but retails for $25 would have a gross profit of $15.
  • Operating expenses. These are expenses not related to delivering your core product or service. Common operating expenses include rent, utilities, employee benefits, payroll taxes, sales and marketing, vendor contracts, and professional services (e.g., attorneys and accountants).
  • EBITDA. EBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” It’s a good measure of a business’s ability to generate cash flow before taking into account certain non-operating expenses, such as interest on loans, taxes, depreciation of assets, and the reduction in value of intangible assets like patents or copyrights. On an income statement, EBITDA is sometimes called “operating earnings.”
  • Interest expense. Interest expense refers to interest owed by a company borrowing money, such as through a business loan, line of credit, or business credit card.
  • Tax expense. This is the amount the business paid on its income tax for a given year.
  • Net income. Once you deduct all expenses from your gross profit, you’re left with your net income, which is the amount of money a company has made after paying off all expenses. This is often referred to as a company’s “bottom line,” and shows its overall profitability.
  • Loss. If expenses are higher than the business’s revenue, the business will generate a loss instead of a profit. Losses show how “in the red” (i.e., below profitability) the business is.

Business owners should use a profit and loss statement to understand if their business is profitable or on the path to profitability. Comparing P&L statements quarter-over-quarter and seeing an increase in revenue may indicate an increase in demand for the product or service.

A decrease in COGS over a period of time may indicate the business is becoming more efficient. If operating expenses are keeping a business in the red, it may signal to a business owner that they should look to cut costs in some areas.

If a young business isn’t showing a net profit on its P&L, it doesn’t necessarily mean trouble yet. In the early days, businesses have to spend more money to make money. As they achieve economies of scale, ideally their COGS goes down while revenue goes up, and they start to turn a profit.

Vertical and horizontal analysis — also called ratio and trend analysis — are two popular approaches to analyzing a P&L statement:
  • Horizontal analysis: This analysis looks at changes over time within a specific line item on the P&L statement. For example, analyzing fluctuations in revenue year-over-year can help a business owner spot trends or seasonal occurrences and optimize the business around them.
  • Vertical analysis: This type of analysis considers the size of expense items eating into a company’s revenue over time. When doing a vertical analysis, business owners look to see how they can improve revenue by cutting out unnecessary expenses.
Horizontal analysis is typically used to compare multiple business periods (e.g., FY 2021 vs. FY 2022) to identify trends in revenue and expenses and understand how much you spent vs. how much you had budgeted. Vertical analysis is used to dig into a specific time period to understand where costs can be cut. Financial professionals will usually run both analyses when reviewing a P&L statement, and finance teams often prepare monthly or quarterly flux analyses to explain changes over time and to understand the “why” behind an increase or decrease to an account.

The accuracy of your income statement hinges on the accuracy of your inputs. To ensure an accurate income statement, avoid these common errors:
  • Miscalculating subscription revenue: Recognizing annual subscriptions as full revenue instead of deferring over time (GAAP/IFRS). Not breaking out revenue types (subscription vs. usage vs. training)
  • Not including all your costs: Overlooking cloud infrastructure costs as part of COGS.
  • Incorrectly categorizing costs: Not separating cost of service (e.g. support, hosting fees) from operating expenses.
  • Missing out on tax credits: Not deducting R&D tax credits where applicable.

Most businesses generate a P&L statement monthly, quarterly, and during tax season to give them a snapshot of the company’s financial performance. They can then perform a vertical and horizontal analysis to look for ways to maximize revenue. P&L statements are also useful for lenders or investors who want to get a better understanding of the business’s performance and financial health before agreeing to give the business any money.

A pro forma income statement, also called a projected income statement, forecasts your company’s future revenue, expenses, and profits over a specific period. It uses assumptions based on historical data, growth goals, and market conditions to predict what your profit and loss (P&L) might look like at a later date.This forward-looking income statement helps you plan for upcoming quarters or years, evaluate the financial impact of new initiatives, and communicate expected performance to investors or lenders. It’s also a key tool for budgeting and strategic decision-making, showing how income and expenses might evolve under different scenarios such as best case, worst case, and most likely. This pro forma income statement template helps you  project revenue, expenses, and net income for upcoming quarters or years. It’s ideal for budgeting, investor presentations, and strategic planning.

Expenses on a pro forma income statement are forecasted by reviewing historical costs, analyzing trends, and adjusting for future changes you expect in your operations or market. Start by categorizing past expenses such as cost of goods sold (COGS), operating expenses, and administrative costs, then identify what’s likely to remain constant versus what will scale or change as your business grows.

Here are a few examples of costs you might project:
  • Fixed costs like rent and insurance based on existing contracts.
  • Variable costs such as marketing or payroll that increase in proportion to revenue.
  • One-time costs like equipment or product launches as separate line items.
These projections help ensure your pro forma statement accurately reflects how your business will spend money in the future, and whether those expenses will support sustainable profitability.

Keep crunching your numbers

Profit margin calculator

See how close your business is to reaching profitability with our fast and easy-to-use profit margin calculators.

SaaS magic number calculator

Quickly get a pulse on how sticky your subscription-based service is with our intuitive SaaS magic number calculator.

It's time banking did more

Mercury offers powerful banking complete with cards, invoicing, capital, and more and is trusted by over 200K entrepreneurs.

Apply Now
Learn More

Disclaimers and footnotes

Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC. Deposit insurance covers the failure of an insured bank.