Managing Business Finances: Why Your Bank Balances Lies to You (And What to Look at Instead)

You check your bank balance. It looks healthy. You sign up for an industry conference without that familiar gut wrench. Three weeks later, you're juggling which supplier to pay first and wondering where it all went wrong.

Sound familiar?

Your bank balance is about as reliable as British weather in April. It might look sunny now, but there's probably a storm brewing that you can't see yet.

And no, you don't need an accountant to understand this, to be honest. You just need to know what you're actually looking at.

The Bank Balance Illusion (Or Why That £15k Isn't Really Yours)

Let me paint you a picture. Say you're a graphic designer with £15,000 sitting in your business account. Looks brilliant, doesn't it? Until you remember:

• VAT return due next week: £3,200

• Corporation tax you've not put aside: £2,800

• The office rent that’s due next week: £2,500

• Salaries due Friday: £6,000

• The software subscriptions that auto-renew tomorrow: £450

Suddenly that £15k is more like £50. And you've still got rent, materials, and your own mortgage to worry about.

This is why managing business finances starts with understanding one fundamental thing: your bank balance shows you what’s already happened, not what’s about to happen.

What Your Bank Balance Actually Tells You (And What It Doesn't)

Your bank balance tells you how much money physically existed in your account at the exact moment you checked it. That's it, really. That's the whole story.

It doesn't tell you:

• What's about to leave your account

• What should have arrived but hasn't

• What you owe but haven't been invoiced for yet

• Whether you can actually afford that new hire

• If you're making a profit (yes, really)

I once worked with a warehouse owner—let's call him Dave—who had £40,000 in the bank and thought he was doing brilliantly. Turns out he'd taken on three massive orders, bought all the stock, but wouldn't get paid for another 45 days. He had cash in the bank but was actually skint. He just didn't know it yet.

The Three Numbers That Actually Matter

If you're serious about managing your finances without someone holding your hand every five minutes, you need to get up close and personal with three numbers. And I promise, they're less scary than they sound.

1. Cash Flow Forecast (Not as Boring as It Sounds)

It’s essentially your financial weather forecast. It tells you what's coming, not just what's here now.

You don't need fancy software to create a cash flow forecast. A simple spreadsheet works. List everything you know is coming in and going out for the next 90 days. Include:

• Invoices you've sent but not been paid

• Bills you know are coming

• Regular payments (salaries, rent, subscriptions)

• Tax deadlines

• Any big purchases you're planning

Suddenly, you can see the storm coming before you're standing in it.

2. Profit: What’s Actually Yours

Revenue isn't profit. Revenue is just money passing through your business like guests at a hotel. Some of it was never yours to keep.

Profit is what's left after:

• Paying for the stuff you sold (stock, materials, outsourced work)

• Covering your overheads (rent, software, salaries)

• Setting aside tax (yes, that counts)

If you're consistently looking at your bank balance instead of your profit, you're basically driving while looking out the passenger window instead of through the windscreen. You might think you're going in the right direction, but you're definitely not watching the road.

3. Debtor Days (Or "Why Am I Skint When I Invoiced Loads?")

This one's simple but powerful: How long does it take, on average, for your customers to actually pay you?

If you invoice £10,000 a month but your average debtor days is 60, you're running a business with a two-month lag. That's two months of wages, overheads, and supplies you're funding before you see any money back.

Know your debtor days. Then do something about them. Chase faster. Change your payment terms. Stop working with the serial late payers who treat your invoice like a polite suggestion.

The "Am I Actually OK?" Weekly Check

Managing business finances effectively doesn't mean drowning in spreadsheets. It means checking the right things regularly.

Every Monday (or Friday, or whenever works for you), spend 15 minutes checking:

Bank balance - Sure, have a look. But don't stop there.

What's coming in this week - Confirmed payments, not hopeful thinking.

What's going out this week - Everything. Including that direct debit you forgot about.

Outstanding invoices - Anything over 30 days needs chasing. Today.

Next month's big expenses - VAT due? Annual insurance renewal? Birthday surprise?

That's it. Fifteen minutes that could save you from a very uncomfortable conversation with your bank manager.

When Your Bank Balance Looks Good But Something Feels Wrong

Trust your gut. Seriously.

If you've got money in the bank but you're feeling that low-level anxiety that something's not quite right, you're probably correct. Your subconscious has spotted something your bank balance hasn't shown you yet.

Usually it’s one of these:

• You've been too busy to invoice (money earned but not requested)

• A big annual cost is looming (insurance, subscriptions, tax)

• Your margins have been shrinking without you noticing

• You've been "borrowing" from the VAT pot (we've all done it, no judgment)

The Bottom Line

Your bank balance is like checking the fuel gauge in your car. Useful, but it doesn't tell you if the engine's about to blow up, whether you're going in the right direction, or if you've got enough fuel for the whole journey.

Look, I'm a firm believer that you can manage business finances without needing someone like me looking over your shoulder every five minutes. But ut does mean you looking at the right information. Your bank balance is just one piece of a much bigger picture.

Start checking your cash flow forecast, your actual profit, and your debtor days. Do it weekly. Make it as routine as checking your emails.

Most business problems give you warning signs long before they become disasters. But you've got to be looking at the right numbers to see them coming.

And if all this still feels overwhelming? That's what people like me are here for. Sometimes you just need someone to help you see the wood for the trees. Let’s chat today.

FAQs

How often should I be checking my business finances if I'm managing them myself?

Weekly at minimum for your cash flow and outstanding invoices. Monthly for your profit numbers and deeper analysis. Think of it a bit like going to the gym—little and often beats a panicked marathon session once a quarter.

Can I really manage business finances without an accountant?

For the day-to-day stuff, you absolutely can. Many small business owners handle this themselves successfully. But you'll still need an accountant for tax returns, year-end accounts, and strategic advice. It's about knowing what you can confidently handle and where to get expert help.

What's the difference between cash flow and profit?

Profit is whether your business is making money overall (revenue minus all your costs). Cash flow is whether you have actual money available to pay your bills this month. You can be profitable but have terrible cash flow if customers pay you slowly. Or you can have great cash flow but be unprofitable if you're living off a big upfront payment.

How do I create a cash flow forecast without complicated software?

Start with a simple spreadsheet. Three columns: Date, Money In, Money Out. List everything you know is coming for the next 90 days. Include invoice due dates (not when you sent them), bill payments, salaries, tax deadlines. Add up each week. It's not perfect, but it's infinitely better than guessing.

My bank balance keeps yo-yoing. Is that normal?

For many small businesses, yes. It usually means you have irregular income or lumpy expenses. The fix is either smoothing out your income (retainers, subscriptions, regular payment plans) or building up a buffer so the peaks and troughs don't stress you out. I’d say aim for at least one month's overheads sitting in reserve.