Six questions your books should answer by the 10th

There is a particular conversation I have had more than once.

An owner says their accounts are fine. Filings are up to date, the auditor is satisfied, nothing is pending. Then I ask which of their products makes the most money, and there is a pause — followed by a reasonable-sounding estimate.

Both things are true at the same time. The books are compliant and they cannot answer the question.

That is not a contradiction. It is a design outcome. Books built to satisfy the department are structured for the department. If nobody ever asked them to answer a commercial question, they will not answer one — and no amount of filing on time changes that.

Here are six questions worth testing yours against. Not at year-end. By the 10th of the following month, while the answers can still change something.

1. What did you actually make last month?

Not turnover. Not “roughly.” The net figure, after everything that belongs in the month is in the month.

Most businesses can produce this at year-end. Far fewer can produce it within ten days of month close, and that is the version that matters — because a decision made in August on July’s numbers is a decision. The same number in March is a history lesson.

If your answer requires someone to “pull it together,” you do not have a reporting system. You have a filing system.

2. Which line makes the money?

A blended margin is the most comfortable number in business and the most misleading.

If you sell four products, or serve four principals, or run three channels, the average tells you nothing about any of them. It is entirely normal for one line to subsidise another for years without anyone noticing — and for the business to grow while getting less profitable, because it grew in the wrong place.

Growing the wrong line is the single most common way a business increases turnover and reduces profit. It cannot be seen from a blended margin, which is exactly why it happens.

3. Where is your cash?

Profit and cash are different, and the gap between them is where most owner-led businesses get into difficulty.

Your money sits in three places: stock you have bought and not sold, invoices you have raised and not collected, and the bank. Only the third is available. The first two are entirely yours and entirely unusable.

The gap is measurable. Receivable days plus inventory days minus payable days gives you the number of days you fund your own trading before the money comes back. At ₹10 lakh a month with a 75-day cycle, roughly ₹24.6 lakh of your money is out at any moment.

You either fund that yourself or an overdraft funds it for you — and the second option charges interest every day of it.

4. Who owes you, and for how long?

“About twenty lakhs” is not an answer. Twenty lakhs split by age is an answer.

Twenty lakhs where most is under 30 days is a healthy business. Twenty lakhs where half is over 90 days is a collection problem that has not been named yet. The total is identical.

Two further things worth knowing, and both are usually uncomfortable:

• Concentration. If one customer is 40% of your book, their payment cycle is your payment cycle and their failure becomes your failure.
• Limitation. Under the Limitation Act 1963, a suit to recover the price of goods or services must generally be filed within three years of the payment falling due. The debt survives. The remedy does not, unless limitation was extended by a written acknowledgement or a part payment.

Old debt does not just become harder to collect. At a point it becomes legally unenforceable, and the date passes silently.

5. What is coming that you have not planned for?

Advance tax. Annual filings. Statutory dues. Renewals.

None of these are surprises. Every one of them has a known date. Yet they land as surprises constantly, because nothing in the system surfaces them until they are due.

The test is simple: can you say what you owe, to whom, in the next ninety days? If that requires someone to check, it will eventually be missed — not through negligence, but because a busy month always beats an invisible deadline.

6. Are you better or worse than last quarter?

A single month means very little on its own. A trend means a great deal.

Margin, collection days, stock days, expenses as a share of revenue — the level of each is less informative than its direction. A business with a 22% margin that was 26% last quarter is in a different situation from one at 22% that was 18%, and the current number alone cannot tell them apart.

This requires the same numbers, computed the same way, every month. Which sounds obvious and is where most reporting quietly fails: the definitions drift, and the comparison stops meaning anything.

What it means if you cannot answer these

It does not mean your accountant is doing a bad job. Most bookkeeping is done exactly as specified — the specification simply never included these questions.

Compliance work is backward-looking by nature. It records what happened so it can be reported. Management reporting is a different job: taking the same underlying data and organising it so someone can decide with it.

The data almost always already exists. Your sales, purchases, receivables and stock movements are all recorded. What is usually missing is the structure that turns them into six answers within ten days of month close.

If you would like a quick read on where yours sits, our free Books Diagnostic asks twelve questions across profit, cash, what is owed both ways, and decisions — and tells you which of four levels your reporting is at today. It takes about three minutes and asks nothing of you to use.

The honest version

Most businesses do not fail from a bad strategy. They fail from a foundation that could not tell them, early enough, that something was going wrong.

The difficulty is that the absence of information feels like the absence of a problem. Nothing alerts you. The books balance, the returns are filed, and the picture stays incomplete in ways that are invisible from the inside.

That is what visibility actually means here. Not more reports. The few numbers that would change a decision, in front of the person making it, while there is still time to act.