Running a business can keep you busy from morning until night. You are finding customers, quoting jobs, doing the work, paying suppliers, chasing invoices and dealing with everything else that comes with running a business.
But here is an important question:
Do you actually know how well your business is performing?
Many small business owners look at their bank balance to determine whether the business is doing well. If there is plenty of money in the bank, they assume the business is making money. If the bank balance is getting low, they assume the business is struggling.
The problem is that your bank balance doesn’t tell the whole story.
You can have a healthy looking bank balance and still have a business that isn’t particularly profitable. Likewise, you can have a profitable business but be short of cash because customers haven’t paid their invoices yet.
Understanding a few key numbers can give you a much clearer picture of the financial health of your business.
Here are seven numbers every small business owner should keep an eye on.
1. Sales – How Much Is Your Business Actually Selling?
The first number to look at is your sales or revenue.
This tells you how much income your business is generating over a particular period.
It is useful to compare your sales with:
- The previous month
- The same month last year
- Your budget or target
- The same period in the previous financial year
For example, if your business generated $100,000 in sales during the first three months of the financial year compared with $80,000 during the same period last year, that sounds positive.
But higher sales don’t automatically mean higher profits.
This is where the next number becomes important.
2. Gross Profit – How Much Are You Making From Your Sales?
Gross profit is essentially the money left after deducting the direct costs associated with producing your goods or providing your services.
For example, if a trades business generates $100,000 in sales and spends $50,000 on materials and subcontractors, the gross profit is $50,000.
That gives the business a 50% gross profit margin.
Gross profit is particularly important for businesses such as:
- Building and construction
- Electrical and plumbing
- Landscaping
- Retail
- Hospitality
- Manufacturing
- Other businesses where materials or direct labour represent a significant part of the selling price
If your sales are increasing but your gross profit margin is falling, you need to understand why.
You may be charging too little, your material costs may have increased, or jobs may be taking longer than expected.
3. Net Profit – What Is Your Business Really Making?
Gross profit isn’t the same as the amount you actually make.
After gross profit, you still have other business expenses such as:
- Rent
- Motor vehicle expenses
- Insurance
- Accounting fees
- Advertising
- Phone and internet
- Software subscriptions
- Wages
- Office expenses
- Bank fees
- Interest and other finance costs
After these expenses are taken into account, you arrive at your net profit.
This is one of the most important numbers to understand because it gives you a much better indication of whether the business is genuinely profitable.
For example:
Sales: $300,000
Direct costs: $150,000
Gross profit: $150,000
Other business expenses: $110,000
Net profit: $40,000
In this example, the business generated $300,000 in sales but only made $40,000 in net profit.
That is very different from saying, “I made $300,000 this year.”
4. GST – Don’t Mistake Tax Money for Your Money
One of the most common mistakes we see with small businesses is treating the GST sitting in the business bank account as available cash.
If your business is registered for GST, the GST you collect from customers generally needs to be accounted for through your BAS.
For example, if you invoice a customer $11,000 including GST, $1,000 of that amount is GST.
That $1,000 isn’t really your money.
It is money that you have collected on behalf of the government, subject to the GST you are entitled to claim on your business purchases.
This is why it is important to understand your GST position rather than simply looking at the bank balance.
A business can have $30,000 sitting in its bank account and still have a significant BAS liability coming up.
5. PAYG Withholding – Money Set Aside for the ATO
If you have employees, another number you need to understand is PAYG withholding.
When you pay employees, you may withhold tax from their wages and report and pay that amount to the ATO.
Again, this money should not be treated as spare cash that the business can spend.
It is a liability that needs to be paid to the ATO.
Keeping track of your PAYG withholding liability can help prevent an unpleasant surprise when your BAS or other payment obligations become due.
6. Superannuation – Don’t Forget About Your Employees’ Entitlements
Superannuation is another important liability for businesses with employees.
Since 1 July 2026, employers have moved to the payday super system, meaning superannuation is required to be paid at the same time as wages rather than being left until a quarterly payment. This makes accurate payroll processing and having sufficient cash available for super even more important.
It is therefore important to make sure your accounting records accurately reflect:
- Wages paid
- Superannuation accrued
- Superannuation paid
- PAYG withholding
- Other payroll liabilities
Don’t assume that because there is money in the bank, you can afford to spend it.
You may have employee entitlements that need to be paid.
7. Accounts Receivable – How Much Money Do Customers Owe You?
The final number is one that many business owners overlook:
How much money do your customers owe you?
You might have completed $50,000 worth of work and recorded $50,000 in sales, but if your customers haven’t paid you yet, you don’t have that money in the bank.
This is why keeping an eye on your accounts receivable is so important.
For example:
- Current invoices: $15,000
- 30 days overdue: $10,000
- 60 days overdue: $8,000
- 90+ days overdue: $7,000
You could have $40,000 outstanding.
That is money your business has earned but doesn’t yet have available to pay its bills.
The longer invoices remain unpaid, the greater the potential cash-flow pressure on your business.
Your Bank Balance Is Not Your Profit
This is probably the most important message in this article.
The amount of money in your bank account is not the same as your business profit.
Imagine your business has $50,000 in the bank.
It might sound like a healthy position.
But you could have:
- $10,000 GST liability
- $5,000 PAYG withholding
- $5,000 superannuation and payroll liabilities
- $15,000 of supplier bills due
- $10,000 of other upcoming business expenses
Suddenly, that $50,000 doesn’t look quite so available.
This is why business owners need to look beyond the bank balance.
How Often Should You Review These Numbers?
You don’t necessarily need to spend hours analysing your accounts every week.
However, I recommend that small business owners regularly review their financial information rather than waiting until the end of the financial year.
At a minimum, you should know:
✔ How much you are selling
✔ How profitable your business is
✔ How much customers owe you
✔ How much you owe suppliers
✔ How much GST and other tax liabilities you have
✔ How much you need to set aside for employee obligations
✔ Whether your cash flow is sufficient for the next few months
Having your bookkeeping and accounting records up to date makes this much easier.
Use Xero to Keep an Eye on Your Business
Cloud accounting software such as Xero can make it much easier to keep track of your business finances.
But simply having Xero doesn’t automatically mean you understand what is happening in your business.
The information needs to be entered correctly and accounts need to be reconciled regularly.
Your accountant or bookkeeper can then use that information to help you understand what the numbers are telling you.
At SWOT Accountants, we help small businesses with Xero, bookkeeping, BAS, payroll, tax returns and business support, so business owners can spend less time worrying about their accounts and more time running their business.
Don’t Wait Until Tax Time to Find Out How Your Business Is Performing
One of the biggest mistakes a business owner can make is waiting until the end of the financial year to find out whether the business has made money.
By then, it may be too late to make important decisions.
Regular financial reviews can help you identify problems early and give you the opportunity to make changes.
For example, you might discover that:
- Your prices aren’t high enough
- Your gross profit margin has fallen
- Customers are taking too long to pay
- Your expenses have increased significantly
- You are carrying too much debt
- Your cash flow is becoming tight
- You are paying too much for certain services
- You need to put more money aside for tax
The earlier you identify these issues, the more options you generally have.
Need Help Understanding Your Business Numbers?
You don’t need to be an accountant to understand your business finances.
But you do need to know which numbers matter and what they are telling you.
At SWOT Accountants, we work with small business owners across Cleveland, Capalaba, the Redlands and the wider Brisbane Bayside area, helping them stay on top of their bookkeeping, BAS, tax and financial information.
If you’re not sure whether your business is actually making money, or you simply want a better understanding of your business numbers, get in touch with SWOT Accountants.
A clearer understanding of your numbers can help you make better business decisions today rather than finding out what happened after the financial year has already ended.