Why does debt not show up on your profit and loss?

When you make a loan payment, only the interest counts as an expense. The principal is treated as paying down a balance, not a cost, so it never appears on your profit and loss. But the whole payment still leaves your account, which is why profit and cash can tell different stories.

How does that change your break-even?

Your accounting break-even might say you are fine, while your cash break-even, the sales you need to actually cover every dollar leaving, is higher. To find the real number, add your full debt payments to your fixed costs before you calculate.

What does the math look like?

Say your overhead is $20,000 a month and you also pay $4,000 a month on loans. Your real fixed cost to cover is $24,000, not $20,000. At a 40 percent margin, that moves your true break-even from $50,000 to $60,000 in monthly sales. That extra $10,000 is the cost of the debt.

What should you do about it?

Always build full debt payments into your break-even and your survival number. Before you borrow more, ask how much it raises the sales you need every month. Debt is a tool, but only if you know the real bar it sets.