Five numbers to review every month

Owners often tell me they get a full set of financial statements every month and never open them. I understand. A balance sheet is not exciting reading. But inside those reports are a handful of numbers that will warn you about trouble months before it shows up in your bank account.

Here are the five I ask every CFO client to look at, in the order I look at them.

The five numbers

• Cash runway: how many weeks your current cash covers fixed costs
• Gross margin: revenue minus direct costs, as a percentage
• Accounts receivable over 60 days: money customers owe you that is getting old
• Owner pay as a percentage of profit: whether the business is actually paying you
• Revenue per employee: whether your team is growing faster than your sales

What each one tells you

Cash runway is your safety margin. Under eight weeks, you should be thinking about a line of credit before you need it, because banks lend most easily to companies that do not urgently need the money.

Gross margin is the clearest signal that your pricing still works. If it slips two or three points over a quarter, something has changed: supplier prices, discounting, or jobs running over. Find out which before it compounds.

Old receivables are a cash problem disguised as a sales success. Anything over 60 days has a real chance of never being paid. Call those customers this week, and consider deposits or card payments for new work.

Profit is an opinion. Cash is a fact. Watch both, but act on cash first.

Owner pay is the number most owners ignore. If the business is profitable on paper but you have taken home less than a salaried manager would earn, you have built yourself a job with extra risk. That is worth a strategy conversation.

Revenue per employee shows whether growth is healthy. Adding people should eventually add more than their cost in sales. If the number has fallen for three quarters in a row, look hard at roles, processes and pricing before the next hire.

Make it a ritual

Put thirty minutes in your calendar on the 11th of every month. Write the five numbers on a single page next to last month and the same month last year. Trends matter more than any single figure. Within a quarter, you will spot problems early, and you will also notice when things are quietly going very well.