Welcome to This Week’s Profit First Accountant Newsletter!

Estimated Read Time: 7 Minutes

Watch the full video here.

It’s Stephen Edwards from Gro Profit First Accountants, and welcome to this week’s Profit First Accountant Newsletter.

This week’s newsletter is based on a real coaching conversation with a business owner.

The business is growing.
Revenue is up.
The team is bigger.
The numbers are larger than ever before.

But cashflow feels tight.

There’s pressure around:

VAT payments

PAYE

Supplier bills

Wages

Paying themselves

And the natural conclusion is:

“I’ve got a cashflow problem.”

But here’s what I explained:

Cashflow problems are usually a symptom. Not the root cause.

Think of cashflow like the warning light on your car dashboard.

The light isn’t the problem.
It’s telling you something underneath needs attention.

When I reviewed 18 months of this client’s figures on our very first call, the picture became clear very quickly:

Yes, cashflow was tight.

But the real issue?

The margins were too thin.

And when margins are too thin, everything feels fragile.

There’s no breathing space.
No buffer.
No room for mistakes.

You’re one unexpected bill away from stress.

Here’s something most business owners don’t realise:

Growth doesn’t fix financial weaknesses.
It magnifies them.

If your margins are tight at £500k turnover,
they’ll be painfully tight at £1m turnover.

More revenue means:

More payroll

More overhead

More tax exposure

More working capital required

If the profitability engine isn’t strong enough, growth simply increases the pressure.

Once we established it wasn’t “just” cashflow, the better question became:

Why is the business not producing enough profit?

And this is where proper analysis matters.

At Gro Profit First Accountants, when we do a Profit Assessment, we’re looking at:

Gross profit margins

Net profit margins

Payroll as a % of revenue

Overheads as a % of revenue

Revenue per team member

Owner’s pay compared to industry norms

Without benchmarking, you’re operating in the dark.

Let me give you a simple analogy.

My son runs the 100 metres in around 11.4 seconds.

Is that good?

It depends who he’s racing.

If he’s compared against runners doing 14 seconds, he looks exceptional.

If he’s competing nationally, the benchmark changes.

In business, it’s exactly the same.

If your peers are running 20% net margins and you’re running at 5%, that’s not a cashflow issue.

That’s a profitability issue.

And until you understand what’s realistically achievable in your industry, you’ll normalise underperformance.

In my experience, profitability issues normally come from one (or more) of these areas:

This is the big one.

A 10% discount doesn’t reduce profit by 10%.
It can reduce profit by 30–50%, depending on your margin.

Many business owners underprice because they:

Fear losing work

Compete on price

Haven’t reviewed pricing in years

But inflation, wages, and supplier costs move — your pricing must too.

Occasional strategic discounting is fine.

Permanent discounting destroys margin.

If your team discounts without understanding margin impact, you’re quietly eroding profitability.

Payroll is usually the largest cost in most service businesses.

Ask yourself:

Is every team member operating at the right level?

Are senior people doing junior work?

Do you have clear productivity targets?

Is revenue per employee healthy?

A bloated or misaligned structure creates constant financial pressure.

The business owner I mentioned is bringing in a lean consultant.

Why?

Because inefficient workflow costs money.

Toyota built its reputation on Kaizen — continuous improvement.

Small inefficiencies repeated daily become large financial drains over 12 months.

Most business owners look at their bank balance and make emotional decisions.

But your bank balance does not equal profit.

Without:

Clear allocation systems

Regular KPI tracking

Margin analysis

A structured Profit First system

You are reacting instead of leading.

Profit First works because it uses behaviour, not willpower.

Parkinson’s Law says:

The more of something we have, the more we consume.

If you see £80,000 in your bank account, you feel comfortable.

If you see £12,000 available for expenses because profit, tax and owner’s pay have already been allocated — you become more resourceful.

Profit First forces discipline automatically.

It creates artificial scarcity in the right way.

It strengthens the engine before the car breaks down.

Now, to be fair, sometimes cashflow genuinely is about timing.

For example:

Large corporate clients paying in 60–90 days

Project-based businesses with uneven billing cycles

Seasonal businesses

But if you are:

Getting paid regularly

Not operating on long credit terms

Not highly seasonal

Then persistent cashflow stress usually points back to profit.

If any of this resonates, here are 5 things to do immediately:

1. Calculate your true net profit margin for the last 12 months.
2. Review your pricing — when was the last increase?
3. Check payroll as a percentage of revenue.
4. Identify any “automatic” discounts being given.
6. Separate profit from your main account if you haven’t already.

Even small margin improvements create massive breathing space over time.

If your car keeps breaking down, you don’t just reset the warning light.

You lift the bonnet.

Cashflow pressure is stressful. I get that.

But if you fix the profit engine, the cashflow warning light often disappears on its own.

If you’d like help reviewing your numbers properly, you can reach me directly:

 [email protected]

Let’s make sure your business is not just growing — but profitable, stable, and giving you the freedom you actually want.

Have a great week.

Stephen Edwards
Profit First Accountant and Business Coach
Gro Profit First Accountants