Do you actually know what last month made?
Money came in. Money went out. What is left is usually a guess until the accountant says otherwise.
Ask most owners of a busy local service business how last month went and you get a feeling rather than a figure. Busy. Quieter than usual. All right, I think.
The feeling is normally based on the bank balance, which is the one number guaranteed to mislead you, because it mixes last month's late payments with this month's van insurance.
The four numbers that tell you everything
- Money in, meaning invoices actually paid in the period, not invoices sent.
- Money out, meaning everything you spent to do the work: materials, fuel, kit, subscriptions, insurance.
- What is left, which is the first number minus the second, and the only one that answers "how did last month go".
- What is still owed, which is not income yet, however much it feels like it.
Four numbers. No accounting knowledge required. The barrier is never the maths, it is having somewhere the figures already live.
Why it is worth the bother
Because almost every decision you are putting off needs one of these numbers.
- Should you put prices up. Answerable only if you know what a job actually leaves you after materials and travel.
- Which work is worth keeping. Nearly every service business has one service that feels productive and earns very little. You cannot spot it by memory, because the busy ones feel like the good ones.
- Can you afford to take someone on. Needs a realistic average month, not a good one.
- Is the quiet month a problem or a pattern. Two years of figures turns panic into a season you can plan for.
Most people find the same thing when they first look properly: they are busier than they thought and keeping less than they assumed.
The minimum viable version
If you do nothing else, do this on the last day of the month. Twenty minutes.
- Add up what was actually paid to you this month.
- Add up what you spent on the business. Keep the receipts in one folder on your phone as you go and this takes five minutes rather than an evening.
- Subtract one from the other and write the answer down somewhere you keep.
- List who still owes you, with the amount and the date it was due.
- Compare with last month. One month is noise. Three is a trend, and a trend is something you can act on.
Keep the record, not just the answer
The value is not in this month's figure, it is in twelve of them side by side. That is when you can see that August is always thin, that one service quietly carries the business, and that the customer you find most demanding is also the one paying for the van.
However you keep it, the test is the same: could you answer what last month made, and who still owes you, in under a minute, without digging? If not, the record is not doing its job yet.