Five Numbers Worth Checking Every Month

Many owners only look closely at their numbers at tax time, or when something already feels wrong. By then the story has usually been running for months. A short monthly check, done the same way each time, turns your books from a chore into an early warning system.

Here are five numbers we suggest looking at every month. Your bookkeeper or accounting software can usually produce all of them.

• 1. Cash in the bank, and where it is heading. Not just today's balance, but how it compares with last month and with the bills you know are coming. A steady decline over several months matters more than any single low day.
• 2. Revenue, compared with the same month last year. Month-to-month comparisons can mislead in a seasonal business. Looking at the same month a year ago gives a fairer picture of whether you are growing, holding steady or slipping.
• 3. Gross margin. This is what is left after the direct costs of delivering your product or service, such as materials and job labor. If revenue is up but gross margin is shrinking, you may be working harder for less. It is often the first place rising costs or underpriced work show up.
• 4. Money owed to you, and how old it is. Look at your accounts receivable by age: current, 30 days, 60 days, 90 and beyond. Older balances get harder to collect, and a growing pile of them can squeeze cash even in a good sales month.
• 5. Overhead as a share of revenue. Rent, office staff, software, insurance and other fixed costs tend to creep up quietly. Checking them against revenue each month helps you notice when the business has grown its costs faster than its sales.

How to make the habit stick:

• Pick a date and keep it. A fixed time each month, after the books are closed, works better than "when I get a chance."
• Write the five numbers down in one place. A simple sheet with one row per month is enough. Trends are much easier to see when last month is sitting right next to this month.
• Ask one question per number. Did it move? Why? You do not need a full answer every time, but noticing the movement is most of the value.
• Bring in your bookkeeper when something looks off. If a number surprises you, that is a good reason for a short conversation, not a reason to panic.

None of this replaces proper bookkeeping or a good accountant. What it does is keep you, the owner, close enough to the numbers that decisions about pricing, hiring and spending are based on what is actually happening rather than on how busy the month felt. In our experience, owners who make this a habit tend to see problems earlier, while they are still small and easier to fix.

This article is general information, not accounting or tax advice. For guidance on your own books, please talk with your CPA or bookkeeper.