I had a client bringing in over a million dollars a year.
They were in the hole every single month.
The revenue was real. The profitability wasn't. And the worst part? They had no idea because they were only looking at half the picture.
This is more common than I want it to be. Business owners track what comes in. They account for the direct costs of delivering their product or service. But the backend… payroll misalignment, idle inventory, the merchant fees quietly skimmed before your deposit even lands… those numbers disappear into the gap between what the business earns and what it actually keeps.
If you've ever looked at your revenue and thought "I should feel better than this" then this one's for you.
Here's what I actually look at when a client tells me they think they're profitable:
Does the accounting software match the bank? If those two numbers don't agree, everything downstream is unreliable.
Is anything falling through the cracks? Unpaid invoices counted as revenue. Merchant fees processed outside the bank feed. Accounts payable that never made it into the books. These aren't rare, they're standard.
What are the five numbers? Net profit (as a dollar amount and a percentage). Cash flow timing. Expense ratios by category. Revenue per employee. Break-even point. If you can't answer all five without digging, you don't have clear eyes on your business yet.
The million-dollar client? Two problems killed them: employees being paid more than they were generating in revenue, and an inventory system so disorganized they kept reordering products already sitting on the shelf. Revenue looked great. The underlying operation was a leak.
You don't need a new system this week. You just need 30 minutes and four buckets.
Reconcile your accounts. Then pull every expense from the last 30 days and sort them:
Payroll — every person you paid, employees and contractors
Overhead — what it costs to keep the business running regardless of revenue
Cost to deliver — what it actually cost to produce your product or service this month
Random/one-time — anything unexpected or non-recurring
That's it. What you'll find in those four buckets, the proportions, the patterns, the line items that surprise you, will tell you more about your true profitability than any dashboard you've ever opened.
And if those four buckets don't feel good to look at? That's not a problem. That's information. And information is where we start.
If you want to see the full breakdown — including the five numbers to track, the two pieces of common advice I think are actively misleading small business owners, and what "cleaning up the books" actually looks like in practice — I wrote it all out in this week's blog post.
Or if you're ready to stop guessing and want a real set of eyes on your numbers, that's what we do at Bray Financial & Consulting. Reply to this email and let's talk.
Talk soon,
Michele