Opinion
The Financial Numbers Every Lehi Small-Business Owner Should Review Monthly
Running a small business in Lehi is an incredible adventure. This community has an amazing energy, and watching a local company grow here is deeply rewarding. But behind the day-to-day excitement of serving customers and building a team, there’s a quieter side to success. That side lives in your financial numbers.
It’s easy to let financial reviews slide when you’re busy. When the days are full, looking at spreadsheets can feel like something that can wait until tax season. However, keeping a close eye on your finances every single month is what separates businesses that survive from those that truly thrive.
Let’s break down the essential numbers you need to review each month to keep your company on the right track.
The Big Picture of Your Revenue and Expenses
The first place to start is your overall income and spending. You need a clear view of exactly how much money came into your business and how much went out. This isn’t just about checking your bank balance at the end of the day. It’s about understanding the patterns of your cash flow.
Look at your total sales first. Are they higher or lower than last month? Why did that change happen? Maybe a specific marketing effort paid off, or perhaps a seasonal shift slowed things down.
Next, examine your expenses. Small costs can add up quickly without anyone noticing. Software subscriptions, office supplies, and minor recurring fees can quietly drain your funds. Reviewing these costs monthly allows you to catch unnecessary spending before it impacts your bottom line.
A great way to organize and understand this information is by using a profit and loss statement guide. This tool helps you categorize your income and expenses clearly so you can see exactly where your money is going.
Understanding Your True Profit Margins
Revenue is exciting, but profit is what keeps your doors open. There’s a big difference between the total money you take in and the money you actually get to keep. To understand your business health, you need to look at two different types of profit margins.
First is your gross profit margin. This is the money left over after you pay for the direct costs of creating your product or delivering your service. If your gross margin is shrinking, it means your production costs are rising faster than your prices.
Second is your net profit margin. This is the final amount after all expenses have been paid, including rent, utilities, insurance, and taxes. If your net margin is low, your business is working hard but not getting much reward. Tracking these margins month over month helps you make smart decisions about pricing and cost management.
The Reality of Your Cash Flow
It’s completely possible for a business to be profitable on paper but still run out of cash in the bank. This happens because of timing. Your bills might be due today, but your customers might not pay you for another thirty days.
Every month, you need to look at your cash flow statement. This shows you the actual movement of cash into and out of your bank account. You need to know your burn rate, which is how fast you spend your available cash each month.
You also need to calculate your runway. This tells you how many months your business can survive if your revenue suddenly drops to zero. Knowing these numbers provides peace of mind and helps you plan for unexpected challenges.
Accounts Receivable and Accounts Payable
If your business extends credit to customers, your accounts receivable is a critical metric. This is the money that people owe you. When customers take too long to pay, it creates a massive strain on your cash flow.
Check your aging receivables report every single month. Look for any invoices that are past thirty, sixty, or ninety days. The longer an invoice sits unpaid, the harder it becomes to collect.
On the flip side, look at your accounts payable, which is the money you owe to your suppliers and vendors. Managing this well ensures you keep good relationships with your partners while keeping as much cash in your bank account as possible for as long as healthy.
