The CFO for Small BusinessFive numbers a small business owner should know each month
You're looking for the few numbers a small business owner should know each month, because looking at all of them is more than anyone wants. Tax CFO Steven Palmieri narrows it to five, and Steven and his team put them on one page. They come from closed books, so you can trust them, and each one takes a sentence to explain. We give no "healthy" level for any of them, since that depends on your business.
Learn my five numbers
One, the cash you really have
This is the bank balance after what's already owed. A balance that looks comfortable can be spoken for by a bill due Friday and a tax payment next month. The number worth knowing is what's left after those, because that is what you can actually use.
Say the bank shows $20,000 and $14,000 of it is already owed. These are made-up round numbers. The cash you really have is $6,000.
Two, what customers still owe you
Sales that haven't been paid are not cash yet. Knowing the total, and how old the oldest balances are, tells you how much of your income is still on the way. If the number is growing faster than your sales, that deserves a conversation with your customers.
Three, what the business still owes
Bills, loan payments, taxes and payroll liabilities make up what you owe. Together they're the other side of number one. If you know both, you know whether the week ahead is comfortable.
Four, profit for the month
Profit comes from the month's closed books, after the adjustments. It's not the same as the change in the bank balance, because profit counts what was earned and spent, while cash counts what moved. If you rely on the bank balance alone, profit is easy to misread.
Five, what you paid yourself and what is set aside for taxes
This one belongs to the owner. How much did you take out this month, and how much has been put aside for the tax that your share of the profit will produce? If the second number is zero, April will bring a surprise. Paying yourself with your taxes in mind shows how to set both.
Why these five
They cover the company's cash, its customers, its debts, its result and your own share. Together they make a picture you can hold in your head. Any one alone can mislead, and this set is hard to fool.
Notice that none of them needs a benchmark. We don't tell you your cash should equal some number of weeks or that your profit should hit some percentage. Those rules of thumb change with the industry, the season and the owner. Your own numbers, month to month, are the useful comparison.
What this looks like when it's done for you
After each close, you get a short page with the five numbers, each with one line on what changed since last month. It takes a few minutes to read. If a number surprises you, that is where the conversation begins. And if you're ever asked for the lender's form, the personal financial statement draws on the same figures.
Both sides. This page's subject touches the company's money in numbers one through four and your own in number five, so a month of numbers has to include both. Whether the business can run without you is the next question once you know them.
Which of the five do you know today?
You will be talking to the Steven Palmieri practice.