Did you make money last month?
Most owners answer this by looking at the bank balance, which is the one number that cannot tell them. Here is how to get a defensible answer in an afternoon, without waiting for an accountant.
Every figure below is hypothetical. The pattern is not.
Ask a Nigerian business owner whether last month was profitable and you will usually get one of two answers. Either "the bank was up, so yes", or "we'll know when the accountant closes the year."
The first is wrong. The second is nine months too late to act on.
Why the bank balance cannot answer it
The bank tells you about cash movement, and cash movement is dominated by timing rather than performance.
Your balance grows in a month where a large customer finally settles an old invoice — even if you sold almost nothing. It shrinks in a month where you paid for three months of stock in advance — even if it was your best trading month of the year.
The two things that decouple them are the same two from how long is your cash actually tied up: stock and receivables. Money can be perfectly real and sitting in a warehouse, or perfectly real and sitting with a customer. Neither shows up in the bank, and both are yours.
Which is why a good month and a full account are only loosely related, and why owners who track the balance feel permanently unsure whether the business works.
Four numbers, one afternoon
You do not need a full set of accounts to answer this. You need four figures, and you can have them by this evening.
1. Revenue — what you invoiced, not what you were paid. Everything billed in the month, whether or not the money arrived. This is the single change that makes the answer meaningful. If you count receipts instead, you are measuring your customers' payment habits, not your trading.
2. Cost of goods sold — the cost of the specific things you sold. Not what you bought during the month; what went out the door. If you bought ₦20m of stock and sold half of it, your cost of sales is ₦10m and the rest is still an asset. Getting this right depends on knowing your landing cost per unit — the whole subject of what a litre of diesel actually costs you.
3. Operating expenses — everything that runs whether you sell or not. Salaries, rent, diesel for the generator, data, transport, bank charges. Cash out for these is close enough for a monthly view.
4. What changed in stock and receivables. Opening and closing figures for both. This is the sanity check, and it is where the surprises live.
The arithmetic
| Revenue invoiced | ₦24,000,000 |
| Cost of goods sold | −₦18,000,000 |
| Gross profit | ₦6,000,000 |
| Operating expenses | −₦4,200,000 |
| Operating profit | ₦1,800,000 |
So the month made ₦1.8 million. Now the part that explains the bank:
| Receivables rose by | ₦3,000,000 |
| Stock rose by | ₦1,500,000 |
| Profit | ₦1,800,000 |
| Cash movement | −₦2,700,000 |
A profitable month in which the bank went down by ₦2.7 million. Nothing is wrong. You made ₦1.8m and invested ₦4.5m of it — plus more — into stock and customer credit. That is a growth month, and it is exactly the month that panics owners who only watch the balance.
Run it the other way and it is more dangerous: a loss-making month can show a rising balance because receivables came in and you stopped buying stock. That is a business liquidating itself and feeling fine about it.
Gross margin is the number to actually watch
Operating profit moves around with one-off expenses. Gross margin percentage is the one that tells you whether the business itself is working:
6,000,000 / 24,000,000 = 25%Track it monthly. It should be boringly stable. When it moves, one of four things has happened, and it is always worth an hour to find out which:
- Your buying cost changed and your selling price did not
- Your sales mix shifted toward lower-margin products or customers
- You gave discounts that nobody consolidated or approved
- Stock is going missing — see the weekly count
A margin sliding from 25% to 21% over a quarter is worth ₦960,000 a month at this revenue. That is more than most cost-cutting exercises will ever find, and it is invisible unless the percentage is calculated every month.
Do it monthly, roughly, on time
The instinct is to wait until the figures are exact. Do not.
A rough answer on the 3rd of the following month, every month, is worth vastly more than a precise one in March. You are not filing anything — you are deciding whether to hire, whether to reprice, and whether last month's plan worked. Those decisions tolerate an approximation and do not tolerate a nine-month delay.
Your accountant's year-end job is compliance. This is a different job, it belongs to you, and it takes an afternoon once you have the habit.