Financial Translation
Guide
Decoding your business numbers
Revenue vs Profit
Revenue
Money coming in from sales.
Profit
What’s left after expenses.
Note: You can have high revenue and still lose money.
Profit vs Cash
Profit
What reports say you earned.
Cash
What’s actually in the bank.
Note: Profitable businesses fail if cash timing is off.
Fixed vs Variable Costs
Fixed
Stay same (Rent, Software).
Variable
Change w/ sales (Labor, COGS).
Note: This distinction reveals the risk of scaling.
Runway & Burn Rate
Runway
Months left at current spending.
Burn
Cash consumed per month.
Note: High burn with no plan creates panic.
Owner Pay vs Health
Pay is not performance. You might pay yourself while struggling, or reinvest while strong.
Rule: Evaluate the business separately from yourself.
Owner Draw vs Payroll
Draw
Money taken out (Distribution).
Payroll
Paid via W2 like an employee.
Note: How you pay yourself affects taxes drastically.
Gross Margin
Percentage of revenue remaining after direct costs (COGS).
Note: If margin is too low, more sales won't fix it.
Reconciliation
Matching your books to your bank statements.
Critical: If not done monthly, reports are guesses.
The 3
Reports
Reports
P&L
- Income vs Expenses
- Identify trends
- View Monthly
Balance Sheet
- Owns vs Owes
- Debt & Obligations
- View Quarterly
Cash Summary
- Focus on timing
- Predicts stress
- Cash Flows Statement
Financial Awareness
Self-Check
No judgment. Just clarity.
I know whether the business made money last month
I review my numbers at least once a month
I understand where most of the money goes
I look ahead at next month’s expenses
I separate business money from personal money
I don’t rely only on my bank balance to judge performance
I understand the difference between profit and cash
I make financial decisions based on patterns, not one month
How to Interpret Your Score
0–3
Checks
You’re likely running the business on instinct and bank balance. This is very common, especially for growing owners.
Next Step:
Schedule one 15-minute block each month to look at last month’s profit and top 3 expenses.
4–6
Checks
You have some visibility, but there are gaps that may be creating stress or uncertainty.
Next Step:
Start reviewing your financials at the same time every month. Include percentages so patterns become clear.
7–8
Checks
You’re financially aware and ahead of most business owners. Your focus should now be consistency and refinement.
Next Step:
Write down one financial decision per month and review it the following month to see if it worked.