Reading your financial statements

Profit & Loss, Balance Sheet, Cash Flow — what each one tells you about the business and which questions it answers.

Three statements together tell you everything about the financial state of the business. Vendly generates them all from the journal entries — no separate data entry. Understand what each one measures and you stop guessing about how the company's doing.

Profit & Loss (Income Statement)

Covers a PERIOD (month / quarter / year). Tells you whether the business made money in that window. Total Income minus Total Expenses = Net Profit.

Sales Revenue (top line) — what you billed customers
Less: Cost of Sales — what those sales cost you to deliver
= Gross Profit — money left to cover overheads
Less: Operating Expenses — salaries, rent, utilities, marketing, depreciation, etc.
= Operating Profit
Less: Interest + Tax
= Net Profit / (Loss)

Profit ≠ Cash. A growing business can be profitable and cash-strapped at the same time — customers paying slowly + inventory pile-up + rapid hiring all consume cash that doesn't show up on the P&L.

Balance Sheet

Snapshot at a single MOMENT (typically month-end). What the business OWNS, what it OWES, and the difference (which belongs to the owners). Always balances: Assets = Liabilities + Equity.

Section	Examples	Meaning
Current Assets	Cash, M-Pesa, Receivables, Inventory	Convert to cash within 12 months
Non-Current Assets	Equipment, Vehicles, Premises	Used for >12 months
Current Liabilities	AP, PAYE Payable, Tax due, Loans < 1yr	Owed within 12 months
Non-Current Liabilities	Long-term loans, Lease liabilities	Owed over >12 months
Equity	Share Capital + Retained Earnings	Owner's share of the business

Cash Flow Statement

Covers a PERIOD. Tells you where the cash actually came from and where it went. Three sections:

Operating — cash from customers minus cash to suppliers and staff. Should be positive in a healthy business.
Investing — cash spent on equipment, vehicles, software, businesses bought. Usually negative for growing businesses.
Financing — loans drawn or repaid, equity raised, dividends paid.

Reports in Vendly

Open Reports

Each statement supports a custom date range. Export to PDF / Excel for the bank, auditors or shareholders.

Reports

Five questions the statements answer

Am I profitable? → P&L for the period.
Why does my bank balance feel different from my profit? → Cash Flow.
Can I pay my bills next month? → Current Assets vs Current Liabilities on the Balance Sheet.
Where is my money tied up? → Receivables + Inventory on the Balance Sheet.
Did this month beat last month? → Compare P&L month-over-month from the same report.

Kenya law that applies

Income Tax Act, Cap 470
Primary statute for PAYE, allowable deductions, reliefs and benefit-in-kind valuation.