Turning categorised transactions into the two reports you will actually use, and the six numbers you should be able to recite from memory.
14 min read · Level 2
A report you produce yourself teaches you something a report you receive never will. Not because you will do it better than an accountant — you will not — but because building it forces you to decide what each number means, and that decision is the thing you are actually short of. Outsource the bookkeeping when it becomes a chore. Do not outsource understanding your own company to save two hours a month; that is the one cost that never shows up on the P&L and always comes due.
Two reports, produced from your categorised ledger:
The P&L — revenue, COGS, gross profit, operating expenses, operating profit. Monthly, with the prior month beside it.
The cash view — opening balance, cash in, cash out, closing balance, plus runway.
Everything else is elaboration.
Because these two answer nearly every question you will be asked and every question you should be asking. Is the model working? (gross margin). Are we spending sensibly? (OpEx trend). How long have we got? (runway).
And because producing them yourself is how the numbers stop being abstract. A founder who has built their own P&L three times knows instantly when a line looks wrong. One who receives it from a bookkeeper often does not read it at all.
P&L — March, with February beside it
Mar Feb Revenue Subscriptions 42,000 38,500 Services 6,000 9,000 Total 48,000 47,500 COGS Hosting (5,400) (4,900) Payment fees (1,300) (1,250) Support salaries (4,000) (4,000) Total (10,700) (10,150) Gross profit 37,300 37,350 Gross margin 77.7% 78.6% Operating expenses Salaries — eng (28,000) (28,000) Salaries — GTM (11,000) (7,000) Marketing (6,200) (4,100) Software (1,900) (1,850) Rent & admin (2,400) (2,400) Total (49,500) (43,350) Operating profit (12,200) (6,000)
Read it in three moves. Revenue is flat — subscriptions grew but services fell, which is good mix news hidden by a flat total. Gross margin is stable at ~78%, so the model is intact. The loss doubled, and the cause is visible: a go-to-market hire and marketing spend, both deliberate.
Cash view — March
Opening balance 214,000 Cash in 39,000 Cash out (56,000) Closing balance 197,000 Net burn 17,000 Runway ~11.6 months
Note cash out (£56k) exceeds the P&L's total costs (£60.2k less non-cash items) differently than expected, and cash in (£39k) is below revenue (£48k) — £9k went to receivables. That gap is the thing to watch.
Six numbers to know from memory: revenue, gross margin, monthly burn, cash, runway, and MRR growth rate.
First-time founders produce a P&L with no comparison column. A single month is almost uninterpretable — £48,000 of revenue is excellent or alarming depending entirely on what last month was.
The second mistake: reading only the bottom line. In the example above, the loss doubled and that is the least informative fact on the page; the mix shift and the stable margin matter more.
The third: producing reports and not circulating them. Even a solo founder should send them somewhere — an advisor, a co-founder, a folder they will reread. A report with no audience gets produced for about three months.
Prior month, or prior month and same month last year. A number without a comparison is not information.
It is the most structural line on the page. Watch the trend, not the level.
Opening, in, out, closing, runway. Five lines. It will not match the P&L, and the difference is the interesting part.
Receivables, prepayments, annual bills, loan repayments. If you cannot explain it in one sentence, something is recorded wrong.
Revenue, gross margin, burn, cash, runway, growth rate. Being able to say them without looking is a genuine signal of how well you know your company.
Investors, an advisor, a co-founder. An audience is what keeps the habit alive past month three.
Monthly, immediately after the close.
Do not build elaborate dashboards before the underlying books are reliable. A correct two-page report beats a beautiful wrong one, and the beautiful one is harder to doubt.
Amazon's annual shareholder letters have consistently emphasised free cash flow per share over reported earnings, and the company has explained repeatedly and publicly why it considers cash generation the more meaningful measure. The 1997 letter, reprinted with every subsequent one, sets out the long-term framing.
Choose the number your company is actually run on, state it, and report it consistently. The discipline is in reporting the same measure in the bad quarters too.
The most commonly misread report is the one in the example above: total revenue flat, so the founder concludes nothing happened. Underneath, recurring revenue grew 9% and one-off services fell — a genuinely good month for a subscription business, reported as a dull one.
Always read revenue by line, never as a total. The mix is usually the story, and the total is what hides it.
Create a free account to read the rest and apply it to your own startup.