You close the month, look at your P&L, and are delighted to see how much profit you make—only to find two weeks later that number has gone down, sometimes a lot, and without any warning or explanation.
If this has ever happened to you, then check out this video on why it happens and what you need to do to stop it from happening ever again.
It’s really frustrating when you can’t rely on your figures. If your profit figure bounces around month after month, that’s uncomfortable because:
- You don’t know the true performance of the business.
- You can’t hold your team accountable to the numbers.
- You can’t prevent recurring issues because you catch them too late.
You want to be able to catch issues on time. Without the right information quickly, that becomes impossible.
Four Key Reasons Why Profit Figures Move
1. No Formal Close-Down Process
Your finance function should have a checklist to close the month properly. This ensures:
- All relevant information is collected.
- Adjustments are made correctly.
- Figures entered into the system are right.
- The balance sheet is updated.
Without a formal process, your P&L won’t be accurate.
2. No Hard Close Date
You need a clear deadline for management information to be presented. Typically, this is 10–20 days after the previous month. Agreeing on a date creates accountability and ensures figures are delivered on time, without last-minute surprises.
3. No Escalation Policy
Even with a process and a deadline, surprises happen. That’s why you need an escalation policy:
- Below the threshold (e.g., £10,000), adjustments can be made, but the head of finance must notify you.
- Above the threshold, the head of finance should consult you before adjustments are made.
This way, you avoid unpleasant surprises and stay in control.
4. No Locked-Down System
After the close date, the system should be locked. Only the head of finance should have the authority to unlock it, and only by following the escalation rules. This prevents unauthorised changes that distort results.
Other Common Issues
Many businesses also face:
- Poor communication between operations and sales.
- Invoices are not chased properly.
- Expenses submitted late.
- Supplier invoices are delayed.
These should be addressed through the closure process.
Why This Matters
You don’t want profit figures to move. You need confidence that:
- Numbers are accurate.
- Processes add rigour and structure.
- Your team can be held accountable.
- You understand the true trading position.
If numbers keep shifting, sit down with your finance function and get it sorted.
Getting the Right Support
If your FD isn’t ensuring the right processes are in place, that’s a problem. Some businesses only have bookkeepers or finance managers without the right experience. In that case, you may need:
- An external FD.
- A fractional FD.
- Support from your accountant.
Don’t just pass the problem on—give your finance team the support they need to get this right.
Final Thought
Fixing this will eliminate horrible surprises and give you confidence in your numbers. When you receive your management pack on the agreed deadline, you’ll know exactly where you stand.
See you next time on Mind Your Own Business.
