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Here are my top 5 tips to manage profit and cash in a business

  • Get your monthly reporting in order
  • Understand your cash
  • Create a profit and loss budget
  • Set daily and weekly numbers – KPI’s
  • Analyse the numbers

Many business owners lack the knowledge, structure and processes they need to fully understand their financial reality. The result is that they often sleepwalk into cash flow problems or experience huge profit volatility from month to month.  These situations can often be prevented or at the very least managed more effectively. 

To truly understand how to take control of the numbers in your business, these are the top 5 things you need to address. By having these in place you will be able to anticipate challenges in good time and pave the way to consistent profit and good cash flow.

Get your monthly reporting in order

Each month you need to have a P&L and Balance Sheet (BS) produced and sent to you. It is not your accountant’s responsibility to monitor these numbers. It’s your business you must know the score.

Set a deadline for these reports. For my clients, it tends to be the 15th day of the month. You want to close off the previous month by the deadline and have the reports emailed over to you. 

Having a deadline is really important because

  • It forces your bookkeeper to keep everything up to date and 
  • It stops the P&L and BS numbers from changing (i.e. you look at the profit one week and you’re rolling in it, the next week that same months P&L has taken a serious battering)

Action: Get you whoever is responsible for this in your business to commit to a specific monthly deadline. Make sure you discuss this with any relevant stakeholders that may bottleneck this process and agree on a plan of action. Turn this into a process and write it down so everyone is clear.

2. Understand your cash

Cash flow is one of those things that will keep you up at night. 

When cash flow is tight, you will need a rolling 13-week cash flow forecast that is broken down by week. Each week you need to have visibility of what’s expected in, what’s expected out and what the bank balance is likely to be at the end of that week. This does need to be fairly detailed to give you the clarity of what you can move around and what you can’t. Yes, this does take effort, but the juice is worth the squeeze. This tool allows you to play ‘what if’ and come up with a proper short-term solution for riding out tricky cash flow situations. If cash is okay but your business is going through rapid growth or prone to cash flow difficulty – weekly is a must.

If you have good cash reserves and a positive cash cycle, a rolling 12-month, monthly cash flow forecast will do. You will want the same amount of detail as above but it’s okay for you to get this along with your Monthly P&L and BS.

Action: Decide if you need a weekly or monthly forecast. If cash is really tight having your forecast up and running within the next 48hours. Agree with your bookkeeper or accountant when and how this will be completed and sent to you. Document this and turn it into a process.

3. Create a profit and loss budget

A P&L budget is your business plan in numbers. You need to have your sales goals, margin targets and expected costs all set out in one document. The great thing about having this tool is that it gives you a profit target for the year. By doing this exercise you are forced to face the reality of your business model. 

My advice is for you to be realistic but stretching on your sales targets. If you can’t make the numbers work, you may have to make some important decisions about what needs to change.  This tool will also help you with ‘what if’ analysis which helps you work out the impact of things like taking on more staff, increasing prices, improving efficiency or increasing overheads.  

Action: Once you have sorted out numbers 1 & 2 start creating your P&L budget. 

4. Daily and weekly numbers – KPI’s!

Key performance indicators or KPI’s are the key numbers that you need to monitor on a weekly or daily basis. These numbers should ideally be reported on one document and cover Sales, Marketing, Operations and Finance. You want the most important numbers from each of these functions.

This holistic view will help you spot problems and opportunities in your business. Most importantly, the frequency of the reporting will enable you to do something about these key numbers before the end of the month (when it’s too late to save the month!)

Action: Get your key people together read the above paragraph out brainstorm the top 3-5 numbers for each function in your business. Agree on how often each number should be monitored and delegate the creation and management of your KPI dashboard to one person. 

PS: Keep it simple! Start with the information that’s easy to get your hands on initially.

5. Analyse the numbers

Turn the above into routines. Never let yourself or any team members off the hook. Don’t miss deadlines and hold people to their agreements. But then…. use the information!

So many businesses have information but just don’t take time to analyse and understand it. Review each of the documents carefully when you get them. Book time in your diary and stick to this scheduled time. Your aim is to understand the story behind the numbers. Ask questions, discuss the figs with relevant team members and start to notice the patterns. They are there…you just need to pay enough attention, enough of the time to notice them

Action: Get your diary out, book specific times to implement the above action and then review times for your monthly accounts, cashflow forecast and KPI’s.

That’s it! It’s a simple but important start to creating great foundations for understanding the numbers in your business. The secret is to make this a routine and to take the time to understand your reality. With the above in place and working well, you can then start moving into more advanced areas of financial understanding.


If you want help implementing the above, get in touch or email Marco at hello@q0l.1f4.myftpupload.com.