Knowing your numbers is the starting point
Do you know your numbers? That means more than remembering yesterday’s sales or checking your bank balance at the end of the day. It means being able to explain what the business earned, what each sale contributed and which commitments available cash must cover. Those answers help you choose priorities without relying only on instinct or a report that arrives after the opportunity to act has passed.
You do not need a screen packed with metrics to begin. You need five clearly defined numbers, identified sources and useful comparisons. Review them each month using the same approach, together with the people who understand the operation. If information is missing, say so. A provisional conclusion is more honest and more useful than a figure that looks complete but is not.
1. Revenue: what you actually sold
The first number is revenue for the period. Gather the month’s sales using the method your accountant validates, and separate returns, discounts and collected taxes. Money received as sales tax is not your own revenue. A transfer between your accounts or loan proceeds is not a sale either: it increases available funds without representing commercial activity. Keep those distinctions visible when you review the month.
Compare revenue with the prior month and with your own goal, if you have one. Where seasonality matters, also review the same month last year. Then break the total down by product, service, location or channel to understand what changed. If sales grew, ask whether you sold more units, changed prices or changed the mix of what customers bought. The answer affects what you should do next.
Revenue measures activity, not whether you earned more. A channel can produce strong sales and leave little after fees or discounts. That is why margin comes next. Keep a consistent revenue definition and document changes in your recording method. Otherwise you may mistake a bookkeeping difference for a real shift in demand and make a business decision based on the wrong explanation.
2. Margin: what each product or service contributes
Gross margin shows what remains from revenue after the direct costs associated with sales. Review it in dollars and as a share of revenue when the underlying information is complete. A percentage helps compare segments; the dollar amount shows what each segment contributes toward the business’s operating structure. Neither view replaces the other, and both need costs recorded on a consistent basis.
The detail depends on the operation. Restaurants consider ingredients and channel fees; a medical practice considers supplies and case costs; a service business considers work directly associated with delivery. Agreeing on what belongs in the calculation prevents two offerings from looking comparable when one has costs recorded and the other does not. If a cost is estimated, keep that fact visible instead of treating the estimate as settled information.
Ask which product or service earns the best margin and how much it contributes to the total. A high percentage with few sales may contribute less than a lower percentage at higher volume. Review changes in discounts, costs and commissions too. The answer is not automatically to remove the least profitable offering. Confirm the number, understand the cause and consider which adjustments are possible before changing what you sell.
3. Earnings: what remains after running the business
Sales and gross margin alone do not tell you what the business earned. After direct costs come operating expenses such as administrative payroll, rent and other costs of maintaining the operation. Results should follow the structure of your financial statements so operating performance remains distinct from interest, taxes and other items. That order makes the review more useful than a single unexplained profit figure.
Ask how much you really earned last month and which difference explains the change from the previous period. Do not mix owner draws into expenses: they are not a cost of operating the business. An equipment purchase should not become a full operating expense simply because money left the bank. Coordinate classifications with your accountant to keep earnings and cash understandable without pretending they measure the same thing.
Before deciding on a cost cut, check whether the expense is recurring, belongs to the period and comes from a complete source. A good-looking result may still be waiting for payroll or vendor invoices. If costs are missing, do not present a margin as final. Mark the period as preliminary and resolve the missing information before using that number to commit to an investment or a payment.
4. Cash: what you have and what comes next
Selling, earning and holding cash are different things. Review available cash against account balances and a reconciliation explaining differences between the bank and your records. Then look at upcoming commitments: payroll, vendors, debt and other scheduled payments. If you operate in several currencies, do not add dollars and pesos directly. Keep them separate or use a dated exchange rate whose source you can explain.
To look ahead 30 days, begin with available cash, add expected collections and subtract expected payments. That forecast is not guaranteed money. A collection depends on a client actually paying, so assumptions must remain visible and be reviewed when dates change. Distinguish confirmed commitments from expectations and do not count a credit sale as cash already received. Record who is responsible for checking each important expected receipt.
If the forecast shows pressure, first review collections that need follow-up and payment dates that may be negotiable. Looking only at sales will not solve the problem: the business may earn a margin but collect after it pays. Clear information lets you prepare a conversation with clients, vendors or partners before a due date becomes an emergency. The forecast should support that conversation rather than give false certainty about the future.
5. Receivables: what you are owed and for how long
The accounts receivable total needs detail. Identify the client, invoice, currency, due date and outstanding balance. Separate amounts still within agreed terms from amounts already overdue. A large balance means something different when it is due next week than when it has gone unanswered for months. The breakdown helps organize collection work without treating every client as equally urgent or sending reminders without context.
Record who will follow up, when the client was contacted and what payment commitment was made. If money appears in the bank but has not been applied to the invoice, investigate before asking the client to pay again. Also distinguish a service dispute from an administrative delay. Both affect cash, but they require different conversations and owners who can address the actual reason the balance remains open.
Compare the balance and its age with the prior month to see whether overdue amounts are building up. Do not rely solely on the total: it might fall because an invoice was canceled rather than collected. Every change needs an explanation. Clear follow-up turns receivables into an action list and improves the quality of the cash forecast you just reviewed. It also gives the next monthly conversation a concrete starting point.
A monthly review that ends in decisions
Bring these five numbers together in a financial dashboard under your brand. Start with totals, review trends and move into the segment explaining a difference. Our guide to reading your business dashboard develops that approach. You do not need to examine every chart; you need answers to the questions that matter for the month and the decisions ahead.
Finish the review with priorities, owners and a date to check progress. At Zigma we start with your dashboard, then provide business consulting to help you use the information your company needs. When an evaluation or decision requires more time, you purchase an additional consulting-hour package with an agreed scope. We do not replace your accountant or promise outcomes without evidence. The focus is knowing your numbers and running a better operation.