How often should I actually look at these?

Monthly for four of them, weekly for cash. Gross margin, debtor days, break-even and cost per hire move slowly enough that a monthly check catches problems while they're still cheap to fix. Cash is different — it can turn in a fortnight, particularly around VAT quarters and payroll dates, so a weekly glance at the balance and the next thirteen weeks is worth the five minutes. What doesn't work is quarterly, because a quarterly rhythm means you can be four months into a margin slide before anyone mentions it. The point isn't the frequency itself; it's that a number you look at regularly is one you notice moving.

What's the difference between gross margin and net margin, and which matters more?

Gross margin is what's left after the direct costs of delivering the work — materials, subcontractors, the labour on the job. Net margin is what's left after everything, including rent, software, insurance and your own salary. In the example above, £42,000 of turnover less £25,200 of direct costs gives 40% gross margin, and after £14,000 of overheads the net margin is 6.7%. Gross margin matters more day to day because it tells you whether the work itself is priced properly, and it's the number you can change fastest. Net margin tells you whether the business as a whole is viable.

I'm profitable but always short of cash. What's the first thing to check?

Debtor days, almost always. If you're owed £84,000 on £504,000 of turnover, that's 61 days of sales sitting in other people's bank accounts, and pulling it back to 40 days releases nearly £29,000 in one go. Check stock next if you hold any, then the timing of VAT, PAYE and Corporation Tax payments against when money actually arrives. Profit is measured when you raise an invoice; cash moves when someone pays it. A thirteen-week cashflow forecast is what makes that gap visible, and it will usually show you the problem in about twenty minutes.

How do I work out break-even if my costs aren't neatly fixed or variable?

Split them roughly and don't agonise over the edges. Costs that would still land if you sold nothing next month — rent, insurance, software, salaried staff — are fixed. Costs that only arise because you did the work are variable. Anything genuinely mixed, put in whichever bucket it mostly belongs to; an approximate break-even you actually use beats a precise one you never calculate. Then divide fixed overheads by your gross margin percentage: £14,000 ÷ 0.40 = £35,000 a month. Recalculate whenever you add overhead, because that's exactly the moment the number changes and nobody thinks to check.

Can I get these from my accounting software without paying for management accounts?

Partly, and it's worth doing. Xero, FreeAgent and QuickBooks will all give you a profit and loss, an aged debtors report and a bank balance, which covers three of the five if your bookkeeping is up to date. What software won't do is tell you the numbers are wrong, which is the common failure — margin looks fine because costs are sitting in the wrong category, or debtors look healthy because credit notes were never raised. It also won't calculate break-even or the turnover a hire needs. Start with the software reports, and get someone to check the underlying numbers make sense.

Five numbers every business owner should know

Most business owners know their turnover. Plenty know roughly what profit they made last year, because their accountant told them so, months after the year actually ended. Fewer could tell you, right now, whether the business is in good shape today. That gap — between knowing what happened and knowing what's happening — is where a lot of otherwise good businesses get into trouble.

You don't need to become a finance expert to close that gap. You need five numbers, checked regularly, not once a year when the accounts are filed. None of these are complicated to calculate — the challenge is usually building the habit of looking at them, rather than the maths itself.

To make this concrete rather than abstract, one illustrative business runs through all five. Call it a services company turning over £42,000 a month, with £25,200 of direct costs and £14,000 of overheads. The figures are made up, but they behave the way real ones do.

1. Profit margin

Turnover is vanity, margin is sanity. A business turning over £500,000 at a 5% margin is in a very different position to one turning over £300,000 at 15% — the second one makes £45,000 and the first makes £25,000, on 40% less work.

Track two versions. Gross margin is what's left after the direct costs of delivery: £42,000 − £25,200 = £16,800, which is a gross margin of 40%. Net margin is what's left after everything: £16,800 − £14,000 of overheads = £2,800, a net margin of 6.7%.

The reason to watch gross margin monthly is that it moves quietly. If it slips from 40% to 36% — a supplier price rise you absorbed, or a job that overran — you lose £1,680 a month. That's £20,160 a year, and it's 60% of the net profit in this example, gone. Spotted in month three you can reprice or renegotiate. Spotted in the year-end accounts you've already paid for it.

2. Cash position

Profit and cash are not the same thing, and the businesses that mix them up are the ones that get caught out. Take the same month: £2,800 of profit on paper. Now suppose debtors rose by £6,000 because two big invoices went out at the end of the month, and the quarterly VAT payment of £4,500 left the account.

Cash movement: £2,800 − £6,000 − £4,500 = minus £7,700. A profitable month in which £7,700 left the bank. Nothing has gone wrong; that's simply how timing works. But if you only ever look at profit, that month reads as a success and you have no idea why the account is emptier.

Know your cash position today, and know roughly where it's heading over the next thirteen weeks. Thirteen weeks is far enough ahead to do something about a problem and near enough that the forecast is worth trusting.

3. Aged debtors

Money you're owed isn't money you have. An aged debtor report shows who owes you what and for how long — and one calculation turns it into something you can act on. Debtor days = (debtors ÷ annual turnover) × 365.

The example business turns over £504,000 a year and is owed £84,000. That's (84,000 ÷ 504,000) × 365 = 61 days. If terms are 30 days, customers are taking twice as long as agreed.

Now the prize. Getting to 40 days would mean debtors of (40 ÷ 365) × £504,000 = £55,233 — releasing £28,767 of cash into the business, one-off, without selling anything extra or borrowing a penny. That is the single largest sum available to most small businesses, and it costs nothing but a process: invoice the day the work is done, chase at day seven, and stop treating a polite reminder as a difficult conversation.

The report tells you something about your own systems too. If the same two customers are always slowest, address that directly — tighter terms, a deposit up front, or stage payments.

4. Break-even point

Your break-even is the turnover you need each month just to cover costs before you make a penny. The formula is fixed overheads ÷ gross margin percentage: £14,000 ÷ 0.40 = £35,000 a month.

That one number reframes everything. This business has £7,000 a month of headroom, or about 17%. A quiet month at £38,000 is fine. A quiet month at £31,000 loses money, and now you know it on the day rather than at the year end. It also prices decisions instantly: take on £1,000 a month of extra overhead and break-even moves to £37,500, so that decision needs £2,500 of extra monthly turnover behind it, not £1,000.

5. Cost of a new hire

The salary is the easy part. On a £30,000 salary in 2026/27, employer's National Insurance is 15% of everything above the £5,000 secondary threshold: (£30,000 − £5,000) × 15% = £3,750. The minimum employer pension contribution is 3% of qualifying earnings, the band between £6,240 and £50,270: £23,760 × 3% = £713. Fully loaded, that's £34,463 before equipment, software or ramp-up time.

Then convert it into the number that actually decides the hire. At a 40% gross margin, covering £34,463 of cost needs £86,158 of additional annual turnover — roughly £7,180 a month — just to stand still. If you can't see where that comes from, the hire isn't affordable yet, however much you need the help.

One number pushes back the other way: the Employment Allowance is worth up to £10,500 a year against employer's NI, and a company that couldn't claim it as a one-director business generally can once it takes on a non-director employee. That often removes the £3,750 entirely. Payroll for your first hire works the whole calculation through.

Seeing this monthly, not once a year

Year-end accounts tell you what happened. Management accounts help you understand what's happening now — which is the only version of that information that's actually useful for making decisions. If you're currently finding out how the business performed nine or ten months after the fact, that's not a small gap, it's most of a year of flying without instruments.

The value of checking these five numbers isn't the numbers themselves — it's what they let you do. Spot a margin slipping in month two instead of month twelve, and you can act on it while it's still a small adjustment rather than a big problem. Notice debtor days creeping up and you can tighten collection before it becomes a cash crisis. None of that's possible if the only time you see the full picture is once a year, well after the year is over.

Build it this week: the thirty-minute version

You don't need a system. You need one recurring half-hour, on the same day each month, and a single sheet with five lines on it:

Gross margin % — (turnover − direct costs) ÷ turnover. Write down last month's and compare it to the month before.
Cash today, and the next thirteen weeks — bank balance now, then the known money in and out week by week. Include the VAT and tax dates; they are the ones that ambush people.
Debtor days — (debtors ÷ annual turnover) × 365. Then write the two oldest invoices next to it, with a name against each.
Break-even — fixed overheads ÷ gross margin %. Recalculate it whenever overheads change, not annually.
Cost per hire — salary + employer's NI + pension, then divide by your gross margin to get the turnover it needs.

Five lines, one sheet, twelve times a year. If a number moves in the wrong direction two months running, that's your signal to do something — and doing something in month two is a small adjustment, where doing it in month twelve is a rescue.

This is exactly why we build Management Accounts into how we work with clients — regular reporting that keeps these five numbers, and the ones specific to your business, in front of you every month or quarter instead of once a year. The cashflow and budgeting work sits alongside it for the second number, which is the one owners most often want help with first. If you want to know what that looks like for your business, get in touch and we'll set out how it works and what it costs.