The question feels simple but most business owners can’t answer it with confidence. Money comes in, money goes out, and somewhere in between you hope there’s something left. That’s not the same as knowing.

Start with the difference between cash and profit. Cash in your bank account doesn’t mean you’re profitable. That money might be from a recent payment that needs to cover bills due next week. It might include sales tax you collected that belongs to Virginia. It might be sitting there because you haven’t paid vendors yet. Cash flow tells you what you can spend right now. Profit tells you whether your business model actually works.

Your income statement is the document that answers this question. Also called a profit and loss or P&L, it shows revenue at the top, subtracts all your expenses, and leaves you with net income at the bottom. Positive number means you made money in that period. Negative means you lost money. But that number only means something if your books are accurate. Every expense needs to be recorded and categorized. Revenue needs to be tracked when it’s earned, not just when cash arrives. If transactions are missing or categorized wrong, your P&L is fiction.

A few practical questions to ask yourself:

Can you pay yourself consistently? Not just when there’s extra cash, but a regular amount that reflects the value of your work. If you can’t take a consistent draw or salary, the business might look profitable on paper but isn’t generating enough to sustain you. And if you’re working sixty hours a week without paying yourself, any profit showing on your books is really just unpaid wages you’re owed.

Do tax bills surprise you? If you owe significantly more than expected at tax time, you probably weren’t tracking profitability accurately during the year. Profitable businesses set aside money for taxes because they know it’s coming.

Are you using credit cards or loans to cover operating expenses? Occasional borrowing for growth is normal. Regularly borrowing to make payroll or pay vendors is a sign you’re spending more than you’re earning.

Do you know your margins? If you sell a product or service for $100, how much is left after direct costs? After overhead? If you can’t answer that, you don’t really know what’s profitable and what’s just generating activity.

The honest answer to your question requires accurate financial records. Monthly bookkeeping that reconciles your accounts, categorizes expenses correctly, and produces reliable financial statements. Without that foundation, you’re guessing. You might feel busy and assume that means profitable, but feeling isn’t knowing.

If you’re not sure whether your books are giving you the real picture, that’s the place to start. Many small businesses in the Richmond area operate for years on gut feeling before finally getting their records in order. Once you have bookkeeping services in Richmond producing accurate reports, look at your income statement. The number at the bottom tells you whether you’re making money. Everything else is just a feeling.