Subtract all business expenses from all business income for the same month; if the result stays positive after you pay yourself a fair amount, the business is making money. Check it every month, not only at tax time, and look at the trend over at least 3 months. ProfitDrawer's expense tracking guide builds this into a 5 minute monthly review. Watch cash too: an unpaid invoice is a sale, not money in the bank yet.
A monthly check:
- Count every expense, including small subscriptions, fees, supplies and vehicle costs or business miles (72.5 cents a mile to June 30, 2026 and 76 cents from July 1, 2026 at the IRS rate).
- Count your time. If profit divided by hours worked is below what you would accept as a wage, the business is not paying you well yet.
- Allow for tax. Self-employment tax is 15.3% on 92.35% of net profit, before income tax.
- Look at margin, net profit divided by income, month by month.
- Check cash: compare profit with your bank balance and your unpaid invoices.
Warning signs: profit only appears when you leave out your own pay, margin falls while sales rise, or you keep moving personal money into the business account.
Keeping personal spending out of your records matters here; a mixed account can hide a loss or make a profit look smaller than it is.
General information, not tax advice.
Source: How to Track Business Expenses: A Simple System for Small Business Owners · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.