Look beyond profit. Four numbers tell you most of the story: cash in the bank versus upcoming obligations, gross margin (are you pricing correctly?), debtor days (how fast customers pay), and your current ratio (current assets versus current liabilities). Review them monthly. A profitable business can still fail if cash runs out.
What it depends on
The full answer depends on your specific circumstances. Here’s what matters.
Cash flow timing
Slow-paying customers, stock build-up and loan repayments can drain cash even when the profit and loss looks good.
Industry benchmarks
The ATO publishes small business benchmarks by industry. Comparing your ratios helps spot problems — and outliers can attract ATO attention.
Record accuracy
Ratios are only as good as the books they come from. Reconciled, up-to-date records are essential.
The last 10%
What a qualified professional can add
The answer above covers the general position. Here’s where professional judgement — applied to YOUR specific situation — makes the difference.
- Building a monthly dashboard of the numbers that matter
- Forecasting cash flow 13 weeks ahead
- Identifying pricing, cost or collection problems early
Questions to ask before you engage one
If you decide to engage a professional, these questions help you evaluate whether they’re right for your situation.
What is my cash runway if revenue dropped 20%?
How does my gross margin compare with my industry benchmark?
How many days on average do customers take to pay?
Which three numbers should I review every month?
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General Advice Warning
The information on this page is general in nature and does not take into account your personal objectives, financial situation or needs. It is provided by Global Mutual Funds Pty Ltd (ABN 20 090 555 436, AFSL 222640) and should not be relied upon as a substitute for professional advice. Consider whether the information is appropriate before acting on it. Read our Financial Services Guide.