Plenty of owners 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 it. You need five numbers, checked regularly, not once a year when the accounts are filed.
1. Profit margin
Turnover is vanity, margin is sanity. A business turning over £500,000 with a 5% margin is in a very different position to one turning over £300,000 at 15%. Track your gross margin (what's left after direct costs) and your net margin (what's left after everything).
How to work it out: Gross margin % = (Revenue − Direct costs) ÷ Revenue × 100. Net margin % = Net profit ÷ Revenue × 100. If margin is drifting down, you want to know in month three, not when the year-end accounts land.
2. Cash position
Profit and cash are not the same thing, and it's the businesses that mix them up that tend to get caught out. You can be profitable on paper and still run out of money if cash is tied up in stock, unpaid invoices or a big tax bill landing at the wrong time.
How to work it out: Start with your current bank balance, then map out expected income and outgoings for the next 90 days — invoices due in, wages, VAT, rent, supplier payments — to see roughly where cash is heading, not just where it sits today.
3. Aged debtors
Money you're owed isn't money you have. An aged debtor report shows you who owes you what, and how long it's been outstanding. If invoices are consistently drifting past 60 or 90 days, that's cash sitting in someone else's bank account instead of yours — and it's usually fixable with a bit of process, not a difficult conversation.
How to work it out: Run an aged debtor report from your accounting software (FreeAgent does this automatically) grouped into 0–30, 31–60, 61–90 and 90+ day buckets. The bigger the balance sitting in the older buckets, the more urgently it needs chasing.
4. Break-even point
Your break-even point is the turnover you need each month just to cover costs before you make a penny of profit. It's one of the most useful numbers in the business because it tells you, instantly, how much headroom you have. A quiet month is only a problem if it takes you below break-even — and you can't know that unless you know the number.
How to work it out: Break-even revenue = Fixed costs ÷ Gross margin %. So if your fixed costs are £10,000 a month and your gross margin is 40%, you need £25,000 of revenue that month just to stand still.
5. Cost of a new hire
The salary is the easy part. The real cost of a new hire includes employer's National Insurance, pension contributions, equipment, training time and the ramp-up period before they're fully productive. Owners who only budget for the headline salary are often surprised, three months in, at how much less headroom they actually have.
How to work it out: Take the salary, add employer's NI, add your minimum auto-enrolment pension contribution, add one-off costs like equipment and recruitment, then add a rough estimate for training time and reduced output while they ramp up. Work out the fully-loaded cost before you commit, not after.
How often should you actually check these?
You don't need to stare at all five numbers every day — that's a fast route to overreacting to normal week-to-week noise. A more realistic rhythm is: cash position weekly, since it changes fastest and matters most if things go wrong; aged debtors every two weeks, so chasing stays proactive rather than becoming a monthly scramble; and profit margin, break-even point and the cost of any new hire reviewed monthly, alongside your management accounts. The point isn't to obsess over the numbers — it's to notice a problem while it's still small enough to fix easily.
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.
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. If you want to know what that looks like for your business, our get in touch sets out how it works and what it costs.
