What Your Financials Should Be Telling You (But Probably Aren't)

If you’re a founder, solo entrepreneur, or early-stage team (pre-revenue to about $5M), your financials should be helping you make decisions,  not confusing you or stressing you out.

Good news: you don’t need to become an accountant, and you don’t need perfect books.

You just need financials that tell the truth.

Why so many founders don't trust their numbers

Do any of these sound familiar?

1. “My P&L says I made money, but my bank account doesn’t.”

2. “My books are always months behind.”

3. “I only look at financials at tax time.”

4. “I don’t know what’s a red flag versus just normal.”

That’s common as you grow and usually not your fault. The real reasons include:

1. Bookkeeping focused on tax filings, not decision-making

2. Using bank balance as the primary indicator of health

3. No consistent monthly review rhythm

4. No one explaining what the numbers actually mean

Your financials probably aren’t “broken” they’re just not being interpreted in a founder-friendly way.

The 3 financial statements you actually need

There are three key reports. They work together.

• Profit & Loss (P&L)

  • Shows whether your business model is profitable.

  • It does not show cash moves.

• Balance Sheet

  • Shows what you own vs. owe at a point in time

  • It's the financial "health check" most founders ignore and if it's inaccurate, your P&L is misleading too.

• Cash Flow

  • Explains why:

    • profitable businesses sometimes have no cash

    • unprofitable businesses sometimes have cash

  • Cash problems are often timing problems, not just profit problems.

Five numbers every founder should review monthly

Forget 30 KPIs. Focus on these five.

1. Gross Margin

   • Tells you whether pricing and delivery really work/

   • Watch out for:

     • Revenue growing while margin shrinks

     • Increasing costs to deliver

     • "Busy but not profitable" patterns

2. Net Profit (or Loss)

   • The bottom line matters, but context matters more.

   • Losses are okay when they're intentional and understood.

   • Unexplained losses are not

   • Founder compensation often distorts this number, so interpret thoughtfully.

3. Cash Burn and Runway

   • Burn = how much cash you're using

   • Runway = how long current cash lasts

   • Every business should know: how many months of runway remain

4. Accounts Receivable (Who Owes You Money)

   • Sales aren't real until collected

   • Slow collections quietly drain cash even when revenue looks great. Are you recovering 100% of amounts owed to you? A lot of new businesses underestimate the amount of chargebacks and deductions that are customary in certain industries

5. Owner Pay Reality

   • Healthy businesses can pay their founder consistently.

   • If you're underpaying yourself long-term, it may be hiding business model issues.

Why your bank balance is often lying to you

It’s easy to think that “we’re doing well because our cash balance is up." Relying solely on your bank balance as a measure of your business may lead to faulty conclusions. Your cash position may look better because your accounting team forgot to pay your largest vendors this month.

In reality, cash is heavily affected by:

1. Payroll timing

2. Taxes and vendor payments

3. Overdue receivables

4. Loans or owner contributions

5. One-time transactions

You can be profitable with no cash, or unprofitable with plenty for a while. Managing your cash balance is critical for the overall health of your company, but it does not solely determine the longevity and performance of your business.

Red flags worth noticing early

Patterns to watch:

• Operational

  • Revenue up, margins down

  • Sales up, cash down

  • Expenses drifting upward without clarity

• Process

  • No monthly close

  • Unreconciled accounts

  • Reports constantly “under review”

• Behavioral

  • Avoiding financial reports

  • Only looking at numbers when cash is tight

  • Making big decisions without data

Early awareness = more options.

What good financial support actually looks like

Different stages need different help:

• Bookkeeper: records transactions

• Controller: ensures accuracy, structure, and reliable reporting

• CFO: planning, forecasting, decision support

Not every business needs a CFO.

Every business needs accurate books.

The level of support should change as you grow.

Simple next steps you can take right now

You don’t need to overhaul everything at once.

Start with:

• Reviewing the five metrics monthly

• Setting a regular financial review meeting (even solo)

• Asking better questions of your bookkeeper or CPA

• Not waiting until tax season to look at your numbers

Progress is about cadence, not perfection.

Want a second set of eyes?

If you’d like help making sense of your financials, options may include:

• Financial health check

• Cash-flow and runway review

• One-on-one clarity session

If you’d like a second set of eyes on your numbers, we’re happy to help.