A practical three-page PDF guide to working capital, break-even and ten essential financial ratios, with illustrative calculations and a monthly review routine.
Working Capital Discipline
The guide opens with a detailed treatment of the cash conversion cycle — the number of days between paying suppliers and collecting from customers. For most SMEs, the gap between debtor days and creditor days is the single largest determinant of whether growth creates cash or consumes it. Worked examples show how a ten-day improvement in debtor collection on a business turning over eight hundred thousand pounds releases roughly twenty-two thousand pounds of cash tied up in working capital at that sales level, as a one-time release.
Practical techniques covered include invoice-timing strategies, supplier payment-term negotiation frameworks, and stock-holding optimisation models that balance service level against tied-up capital.
Break-Even and Contribution Analysis
Chapter three introduces the contribution margin concept with a step-by-step build from fixed costs through to the unit or revenue break-even point. A supplementary sensitivity table shows how break-even shifts under three scenarios — price increase, volume increase, and fixed cost reduction — giving managers a decision framework rather than a single static number.
Knowing your break-even point is not optional intelligence — it is the minimum altitude at which the business remains airborne.
Ratio Benchmarks
The final chapter presents the ten ratios every SME should track monthly: current ratio, quick ratio, gross margin, operating margin, net margin, debtor days, creditor days, stock turn, return on capital employed, and gearing. Each ratio includes a definition, a worked calculation from a sample set of accounts, interpretation guidance, with a reminder to set targets using relevant sector data, and a commentary on what movement in either direction signals about operational health.
The guide is designed to sit alongside the FinanceOS Business Insights Dashboard — teams can compare their platform-generated KPIs against their own trends, relevant sector benchmarks and agreed targets to identify where performance diverges from sector norms and where corrective action should be prioritised.