Running a business is a bit like driving a car. You can wait for the annual MOT (your year-end accounts) to find out if there’s a problem, or you can perform regular checks to keep everything running smoothly and spot issues before they become serious.

In the fast-paced business environment of Crawley, waiting a full year for financial feedback is a risky strategy. A quarterly financial health check is your 90-day service. It’s an empowering process that allows you to move from guessing to knowing, giving you the data you need to make smart, agile decisions.

This DIY guide will walk you through five vital signs to check in your business every quarter, complete with some contextual benchmarks to guide you.

Why Wait a Year? The Power of the 90-Day Review

An annual set of accounts tells you where you’ve been. A quarterly review tells you where you’re going. By checking in every three months, you can:

• Spot problems early: Catch declining profit margins or a looming cash flow issue before it becomes a crisis.
• Make data-driven decisions: Decide whether to hire, invest, or cut costs based on real numbers, not just gut feel.
• Stay on track with goals: Regularly measure your progress against your annual targets and adjust your strategy accordingly.
• Reduce year-end stress: A quick quarterly tidy-up makes preparing your annual accounts significantly easier.

Your Quarterly Health Check Toolkit: The 5 Key Vital Signs

Grab your latest financial reports from your accounting software (like Xero or QuickBooks) and let’s get started.

1. The Profit & Loss (P&L) Review

Your P&L statement is a summary of your income and expenses over the last quarter. It’s the first place to look to check your core profitability.

What to look for:

• Gross Profit Margin: Calculated as (Revenue - Direct Costs) / Revenue, it shows the profitability of your core product or service.
• Net Profit Margin: Calculated as (Net Profit / Revenue), it shows your real profitability after all costs are paid.

Benchmark Context: While a healthy target for many service-based businesses in West Sussex is a Net Profit Margin of 10-15%, this varies hugely by industry. For a tech consultancy, it might be higher. For a competitive retail or hospitality business, a consistent single-digit margin could be perfectly normal. The key is to track your own margin trend over time and investigate any sudden drops.

2. The Balance Sheet Sanity Check

Your Balance Sheet is a snapshot of what your business owns (Assets) and what it owes (Liabilities). It reveals your company's financial stability.

What to check:

• Current Ratio: Calculated as Current Assets / Current Liabilities. In simple terms, it asks: "Do you have enough easily accessible cash to cover your bills for the next few months?"

Benchmark Context: As a general rule of thumb, a healthy Current Ratio is between 1.5 and 2. However, this isn't a universal rule. A high-turnover retail business might operate efficiently on a lower ratio, while a capital-intensive business may need a higher one for stability. If your ratio is consistently below 1, it’s a warning sign to investigate, but don't panic without considering your business model and seasonal factors.

3. The Cash Flow Reality Check

Profit isn't cash. You can have a profitable quarter on paper but still have no money in the bank. This check is about the real cash moving in and out of your business.

What to ask:

• Review your bank statements. Is the closing balance going up or down over the quarter?
• Look at your cash flow forecast. Do you have a cash buffer?
• Benchmark Context: A sensible minimum goal is to hold enough cash to cover at least 3 months of all your essential fixed costs—including rent, rates, salaries, and key software subscriptions.

4. The Aged Debtors Review

"Aged Debtors" is the accountant’s term for "who owes you money." This is a critical check for any business that doesn’t get paid upfront.

What to look for:

• Run an Aged Debtors report. Who is your slowest paying client?
• Debtor Days: This metric calculates the average number of days it takes for your customers to pay you.

Benchmark Context: If your standard payment terms are 30 days but your Debtor Days metric is sitting at 50, it’s a sign that your collection process needs attention. It's worth noting, however, that some industries, like construction or manufacturing, often operate on longer 60 or 90-day terms, so what's 'normal' depends on your sector.

5. The Progress Against Goals Check

Finally, how are you tracking against the annual goals you set at the start of the year?

What to ask:

• Are you on track to meet your annual revenue and profit targets?
• Benchmark Context: A simple check is to see if you're 25% of the way there after Q1. However, remember to adjust this for seasonality. A West Sussex gift shop, for example, would expect to be well below the 25% mark at the end of Q1 but significantly ahead by the end of Q4.

You've Got the Numbers. Now What?

A health check is only useful if you act on the results.

• If your Profit Margins are down, it's time to review your pricing or renegotiate with suppliers.
• If your Current Ratio is low, your immediate priority should be chasing overdue invoices.
• If your Debtor Days are high, it’s time to tighten up your payment terms and implement automated reminder emails.
• If you're behind on your goals, you may need to increase your marketing spend or launch a new offer.

Go Beyond the DIY Check: Book a Hands-On Financial Workshop

This DIY guide gives you the questions to ask, but the real value comes from interpreting the answers and building a concrete action plan.

That's why we offer our Accountancy Support Workshops. This isn't a generic seminar; it's a one-on-one session where Chris Irving will come to your business in Crawley or the surrounding West Sussex area.

Together, you'll dive deep into your P&L, balance sheet, and cash flow. We’ll analyse your specific numbers, benchmark them against your industry, and identify the hidden opportunities to reduce costs and increase your profitability.

Stop guessing what the numbers mean. Book a hands-on workshop today and get a clear, expert-led action plan to boost your bottom line.