Having worked with many businesses over the years — and made some of these mistakes myself — I’ve noticed a set of financial blind spots that come up again and again. Here’s what they are and what to do instead.
1. Not Doing Management Accounts
Some business owners rely entirely on the annual accounts their accountant produces. This is a serious problem. Your bank balance isn’t a reliable guide to financial health — some of that money belongs to HMRC, to suppliers, or to staff whose payday is coming. And some of your money isn’t in the bank at all; it’s sitting with debtors.
Monthly management accounts are the minimum standard to aim for. Quarterly is better than nothing, but waiting 90 days for information means you’re always flying blind. Aim to close the books and have accounts ready by the 10th of the following month. If you can’t hit that target, identify the blockers and systematically remove them.
2. Budgeting by Aspiration Rather Than Science
It’s surprisingly common for businesses to set revenue and profit targets that are little more than wishful thinking, with no detailed process behind them. A solid budget starts from the ground up: what can you reliably expect from existing customers? What does your pipeline suggest, based on historical conversion rates? What’s the gap, and what’s your concrete plan to close it?
Your budget should also account for all planned overheads, headcount changes, and any structural shifts in the business. If there’s a hire you want but aren’t sure you can afford, leave it out of the budget but note it as a conditional decision to revisit later in the year.
Budgeting is a skill that improves with practice — but only if you start.
3. Not Tracking Variance or Updating Forecasts
Once you have a budget, use it. Produce a monthly profit and loss variance report: what did you say you’d do, what did you actually do, and what’s the difference? Then maintain a rolling forecast — your budget for the year, with completed months replaced by actuals and forward months updated as your knowledge improves.
This gives you a clear picture of your trajectory and, over time, sharpens your ability to predict performance accurately.
4. Ignoring the Balance Sheet
Profit and loss gets all the attention, but the balance sheet is just as important. It tells you where all your money actually is — cash, debtors, creditors, net current assets. It’s not glamorous, but it tells you the truth about your financial position at any given moment. I was a late convert to this myself, but I wouldn’t be without it now.
5. No Cash Flow Forecast
At minimum, maintain a short-term cash flow forecast covering the next 60 days. For businesses in a period of change or decline, a medium-term forecast based on your budget assumptions is also valuable. As the saying goes: if you’re losing altitude, you need to know where the ground is.
6. Not Accounting for Work in Progress
For project-based businesses — particularly in construction or anywhere with staged billing — your invoices don’t always reflect the work actually completed in a given period. Without accounting for work in progress, your profit figure is meaningless. In my own business, the invoiced P&L can look like we’ve lost a significant sum in a month when we know the underlying performance was strong. WIP accounting is what separates a real number from a misleading one.
7. Not Accounting for the Owner’s Salary
This one distorts more P&Ls than people realise. As a business owner, you’re paid for two things: the work you contribute to the business (salary) and the returns from owning it (dividends/profit). Many owners take both through dividends, which means their labour cost never appears as an overhead.
The fix: ask honestly what it would cost to hire someone to do your role. That figure belongs in your overheads. Without it, your profit margin is inflated — and incomparable to any business that pays market salaries. I regularly see small businesses claiming 25% net margins that would evaporate entirely if the owner’s time were properly costed.
8. Not Sharing Financial Performance With Your Leadership Team
You can’t expect your leaders to drive profitability if they don’t know what the numbers are or what drives them. Share the relevant figures, educate your team on what moves them, and hold a monthly finance review meeting. That meeting does double duty: it creates a deadline that keeps the accounts getting done on time, and it turns financial performance into a shared team concern rather than a private worry.
9. Not Giving Leaders a Stake in the Outcome
This isn’t a rule, but it’s something I feel strongly about. If you want to build a serious business, give the people around you a real reason to care about its financial success. In my business, that’s taken the form of a share option scheme — meaning leaders aren’t just incentivised by a bonus, they’re actual shareholders with skin in the game. Nothing makes a leadership team feel more genuinely invested than actually being invested.
