Check five numbers every month: revenue, gross margin, operating expenses, cash at bank, and money owed by customers. Together they tell you whether you are selling enough, keeping enough of each sale, spending sensibly, able to pay your bills, and getting paid on time.
1. Revenue
What it is: your total sales for the month, before any costs.
Why it matters: it shows whether customers are buying. Watch the trend over several months, because one good or bad month can mislead.
When it falls: ask whether you have fewer customers, smaller orders, or lower prices, and deal with the cause, not the symptom.
2. Gross margin
What it is: the share of each sale you keep after paying the direct cost of what you sold. To work it out: revenue minus cost of sales, divided by revenue, times 100.
Why it matters: you can sell more every month and still earn less if your margin is shrinking.
When it shrinks: check whether your costs have risen, your prices have slipped, or your mix of products has changed.
3. Operating expenses
What it is: the running costs of the business, such as rent, salaries, utilities and transport.
Why it matters: these costs come every month, whether you sell or not.
When they rise faster than sales: look line by line for the costs that have grown, and decide which ones earn their place.
4. Cash at bank
What it is: the money you can actually use today.
Why it matters: profit is not cash. Bills, salaries and taxes are paid from cash.
A simple check: divide your cash at bank by one month of operating expenses. The answer is roughly how many months your cash would last if sales stopped.
5. Money owed by customers
What it is: sales you have made but not yet been paid for.
Why it matters: until a customer pays, that sale cannot pay your bills.
When it grows faster than sales: customers are paying more slowly. Follow up overdue invoices, and agree clear payment terms before you deliver.
Check your own numbers
Every month, the Monthly Clarity Report puts these five numbers on one page for clients with ongoing monthly support (a retainer), with three traffic lights and three recommended actions.
Questions people ask
Is profit the same as cash?
No. Profit is what is left after costs, on paper. Cash is the money you can actually use today. A business can show a profit and still run short of cash, for example when customers pay late.
How often should I check these numbers?
At least once a month, after your books are updated. Look at the trend over several months, not one month on its own.
What if my books are not up to date?
Then the numbers cannot be trusted yet. Bringing the books up to date comes first. That is what the Finance Office does every month.
General information only, not advice for a specific business or person. If you would like advice on your own situation, book a conversation.