Why Your Profit & Loss Statement Isn’t Telling You the Truth

If your Profit & Loss statement looks healthy… but your bank account doesn’t — you’re not alone.

I see this all the time working with small business owners in Phoenix. They run a Profit & Loss report in QuickBooks Online, see a profit, and assume everything is fine.

Then reality hits:

• Cash feels tight

• Taxes are higher than expected

• Or they’re asking, “Where did the money go?”

Here’s the truth:

Your Profit & Loss report isn’t lying — but it also doesn’t tell the full story.

1️⃣ Profit Does NOT Equal Cash

This is the biggest misunderstanding I see.

Your Profit & Loss shows accounting profit — not available cash.

A few common examples:

• You send invoices → income shows immediately (even if unpaid)

• You buy equipment → cash leaves the bank, but expense may be spread out

• Credit card expenses hit reports before cash actually leaves

So yes… your business can show a profit while feeling broke.

That doesn’t mean you’re doing anything wrong — it just means the numbers need context.

2️⃣ Cash vs Accrual Can Change Everything

Another common issue is timing.

Depending on how your books are set up, reports may show:

• Income when it’s earned (accrual)

• OR when money moves (cash basis)

That means:

December sales paid in January could make one month look amazing — and the next look terrible.

Same business. Same transactions. Completely different story.

This is why understanding your report settings matters.

3️⃣ Misclassified Transactions Quietly Wreck Your P&L

This is where bookkeeping quality really shows.

A Profit & Loss report is only as clean as the data underneath it.

Common issues I fix during clean-up projects:

• Owner draws coded as expenses

• Personal purchases mixed into business

• Loan payments showing as expenses

• Uncategorized transactions sitting for months

One or two errors won’t kill your reports.

Hundreds will.

4️⃣ Payroll Costs Are Bigger Than Most Owners Realize

Many owners look at net pay and think:

“That’s my payroll cost.”

But payroll includes:

• Employer taxes

• Benefits

• Payroll processing fees

• Timing differences between pay periods

This often explains why profit swings wildly month to month — even when revenue is stable.

5️⃣ Your Profit & Loss Is Only One Piece of the Puzzle

A good bookkeeper doesn’t just look at one report.

We’re also looking at:

• Balance Sheet

• Cash flow trends

• Aging reports

• Debt vs equity

Think of your Profit & Loss like one chapter of a book — not the whole story.

What This Means for Small Business Owners

If your numbers feel confusing, you’re not bad at business.

Usually it just means:

➡️ The bookkeeping underneath needs attention.

Once the books are clean, your reports start making sense — and decisions get easier.

💡 How I Help

I work with Phoenix small businesses to:

• Clean up messy books

• Make QuickBooks reports actually useful

• Provide clear, tax-ready financial statements

Because a good Profit & Loss should answer questions — not create more of them.

🚢 Can You Deduct a Cruise If You Work While on Vacation?

A question I get all the time:

“If I’m on a cruise but still working in my business, can I write it off?”

Short answer: almost never.

Long answer: welcome to one of the most misunderstood areas of the tax code.

Here’s the clear, no-fluff cheat sheet.

✅ The Rule the IRS Actually Cares About

The IRS doesn’t care whether you worked.
They care why you traveled.

Travel expenses are only deductible when the trip is primarily for business.

Working remotely while on vacation does not make a trip a business trip.

Checking email.
Reconciling books.
Running payroll.
Meeting with your team on Zoom.

👉 That’s considered incidental business activity, not a business purpose.

🚫 What You CANNOT Deduct on a Cruise

Even if you work every day.

Even if you’re the only employee.

Even if clients message you nonstop.

These are personal vacation expenses:

• Cruise fare

• Cabin cost

• Port fees & taxes

• Gratuities

• Drink packages

• Shore excursions

• Meals and entertainment

• “Part of the cruise because I worked”

Putting any of this into “Travel” is one of the fastest ways to create audit risk.

⚠️ The Special “Cruise Ship” Tax Rule (and why it rarely helps)

The IRS does allow cruise travel deductions in very limited situations.

All of the following must be true:

• The trip is primarily for business

• You’re attending scheduled business activities (conference, training, convention, etc.)

• The ship is U.S.-registered

• All ports are U.S. ports or U.S. possessions

• You receive a written statement from the organizer

• You attach a statement to your tax return

• Total deduction is capped at $2,000 per year

Most leisure cruises fail this test immediately.

Working from a balcony with Wi-Fi does not qualify.

✅ What MAY Still Be Deductible While You’re on a Personal Cruise

Even on a non-deductible trip, you can usually deduct separate, business-only operating expenses, such as:

• Ship Wi-Fi package used for business

• International phone plan for client calls

• Business software (QuickBooks, apps, subscriptions)

• Computer equipment or accessories bought for work

• Client-related expenses that would exist even if you stayed home

These are not travel deductions.
They’re normal business expenses that just happen to occur while you’re away.

🧭 When Travel DOES Become Deductible

Travel is deductible when:

• The primary purpose of the trip is business

• You’re traveling to:

  • Meet clients

  • Perform services

  • Attend a conference or training

  • Conduct official business activities

Example:

✔ Fly to Miami to meet clients → airfare & hotel deductible
❌ Take a cruise afterward → cruise is personal

Mixing business into a vacation does not convert the vacation.

👤 “But I’m the Only Employee…”

That doesn’t change the rule.

The IRS does not allow deductions simply because your business can’t pause.

They look at:

• Intent

• Structure

• Documentation

• Primary purpose

Not inconvenience.

🧠 The Simple Geek Rule

If you would have taken the trip even if no business existed, it’s personal.

If you took the trip because business required it, it may be deductible.

QuickBooks Online Sales Tax vs. TaxJar: Which Is Right for Your Business?

Sales tax compliance is one of the trickiest parts of running a business. Between tracking rates across multiple states, keeping up with economic nexus laws, and filing returns on time, many business owners quickly realize they need help. Two popular solutions are QuickBooks Online Sales Tax and TaxJar—but they approach the problem very differently. Let’s break down how each works and which might be the better fit for your business.

QuickBooks Online Sales Tax: Built-In Simplicity

QuickBooks Online (QBO) comes with an automated sales tax engine powered by Intuit’s database. Here’s what it offers:

✅ Pros:

• Automatic Rate Calculation: QBO pulls in real-time sales tax rates based on your customer’s location, so you don’t need to manually maintain rate tables.

• Nexus Tracking: You can mark which states you collect tax in, and QBO applies the rules accordingly.

• Seamless Integration: Since it’s part of QuickBooks Online, there’s no extra software or subscription required. Your invoices, receipts, and reports all tie together.

• Basic Reporting: QBO provides sales tax liability reports that help when it’s time to file.

❌ Cons:

• Filing Is Still Manual: QuickBooks Online does not file your returns or remit tax payments automatically. You’ll need to log into each state’s portal (or hire someone to do it).

• Limited Complex Nexus Support: If your business sells across multiple states or channels, QBO’s tracking can become cumbersome.

• E-commerce Limitations: QBO doesn’t directly connect to Amazon, Shopify, or other marketplaces to pull in transactions with marketplace facilitator tax rules.

Best For: Small to mid-sized businesses with sales in just one or a few states, and those already using QuickBooks Online who want a simple, low-cost solution.

Make it stand out

Whatever it is, the way you tell your story online can make all the difference.

TaxJar: Dedicated Sales Tax Compliance

TaxJar is a specialized platform built entirely around sales tax. Acquired by Stripe, it focuses on automating the entire sales tax lifecycle.

✅ Pros:

• Multi-State Nexus Management: TaxJar automatically monitors your sales across states and alerts you when you cross economic nexus thresholds.

• Automated Filing: With TaxJar AutoFile, the software can submit returns and remit payments on your behalf.

• E-commerce Integrations: TaxJar connects with Shopify, Amazon, WooCommerce, BigCommerce, and more—pulling in sales automatically.

• Detailed Reporting: Provides clear breakdowns of taxable, non-taxable, and exempt sales by state and jurisdiction.

❌ Cons:

• Extra Cost: TaxJar is a separate subscription, so you’re paying in addition to QuickBooks Online. Pricing varies by transaction volume.

• Learning Curve: More powerful features can mean more setup and ongoing management.

• Separate System: While TaxJar integrates with QuickBooks Online, it’s still another platform to log into and maintain.

Best For: E-commerce businesses, companies selling across multiple states, or those that want fully automated filing and peace of mind.

QuickBooks Online Sales Tax vs. TaxJar: Side-by-Side

Choosing the Right Tool

• If you’re a local service business or only collect sales tax in one or two states, QuickBooks Online’s built-in sales tax feature may be all you need. It keeps things simple and doesn’t add extra cost.

• If you’re an e-commerce seller or a business with multi-state obligations, TaxJar’s automation can save you countless hours and reduce the risk of missed filings or penalties.

Final Thoughts

Both QuickBooks Online Sales Tax and TaxJar can help you stay compliant, but they’re designed for different types of businesses. The best choice comes down to where you sell, how complex your sales tax obligations are, and how much automation you want.

For many businesses, the sweet spot is actually using both together: QuickBooks Online for your accounting and bookkeeping, and TaxJar for automated sales tax compliance.