Monthly Business Review: Simple KPIs for Owners

If you're running a small business (3–10 employees), you likely have dozens of metrics you could track. Revenue by channel, customer acquisition cost, employee productivity, inventory turnover. The list is endless. But most owners don't need all of them—they need three: runway, gross margin, and payroll cadence.

1. Why this topic matters in real life

A business can look profitable on paper while being one payroll cycle away from failure. These three KPIs answer the questions that keep owners up at night: How long can I operate if revenue drops? Am I making money on each sale? Can I reliably pay my team? Without these metrics visible, you're flying blind.

2. Daniel's Story: The Monthly "Surprise"

Daniel owns a small marketing consultancy with 5 employees. For the first two years, he ran monthly financials passively—he'd look at his bank balance and assume things were fine. Revenue was steady, invoices were coming in, and his payroll was being paid on time.

Then, in month 18, his largest client (45% of revenue) unexpectedly cut their contract by half. Within weeks, Daniel realized he didn't have clear visibility into how long his cash would last. He had no idea if he was still profitable on the remaining work, and he couldn't quickly assess whether payroll was sustainable. He ended up cutting two positions in a panic.

The mistake wasn't a lack of income—it was a lack of system. Daniel had never tracked runway, margins, or payroll predictability. If he had, he would have seen the vulnerability earlier and had time to plan.

3. Explanation of the financial mechanism

Runway: How many months can you operate if revenue stops tomorrow? It's calculated as: (Current cash reserve) ÷ (Monthly burn rate). If your burn rate is $15,000 per month and you have $75,000 in the bank, your runway is 5 months. This tells you how much buffer you have.

Gross Margin: The percentage of each sale that's actually profit after direct costs. Calculated as: (Revenue – Direct Costs) ÷ Revenue. If you invoice $10,000 but spend $3,000 on freelancers and tools to deliver it, your gross margin is 70%. This tells you if your business model is healthy.

Payroll Cadence: How predictably can you pay your team? This tracks whether payroll is consistent month-to-month, whether you can absorb a slow month, and whether growth can sustain additional headcount.

Together, these three metrics tell you:

Runway = time to find solutions
Gross Margin = whether you're earning enough per sale
Payroll Cadence = whether your team is secure

4. Common mistakes people make

Confusing Cash Balance with Runway: A big bank balance feels safe, but if you're spending $20,000 per month on payroll, that $100,000 is only 5 months of runway. Time moves fast.
Ignoring Gross Margin: Some owners focus only on total revenue. If your margin is 20%, you need 5× the revenue to have the same profit as a business with an 80% margin.
Treating Payroll as Fixed: Payroll might be the hardest line item to cut, but if it varies wildly month-to-month, your team's security is at risk, and you'll struggle to plan growth.
Reviewing KPIs "When You Have Time": This usually means never. The insights lose relevance if they're 2–3 months old.

5. A simple decision or habit framework

The Monthly 30-Minute Review:

Calculate runway. Bank balance ÷ Monthly burn rate = Months of operation.
Calculate gross margin. (Total revenue – Direct costs to deliver) ÷ Total revenue = %. Compare to last month.
Track payroll cadence. Is payroll sustainable this month? Next month? What's your headroom?
Set an alert threshold. If runway drops below 6 months, it's time to act (increase sales, reduce costs, or secure a line of credit).

Set a recurring calendar reminder for the first Monday of each month. Spend 30 minutes. Write down the three numbers. Notice trends.

5.1. A concrete example: Daniel's January review

Here's exactly how Daniel set up Ambrosia from scratch to track his three KPIs.

Step 1: Create 2 wallets

Wallet 1: Operating Account

Purpose: All revenue deposits and daily business expenses (direct costs, payroll)
Starting balance: $90,000
Alert: Low-cash warning at $90,000 (triggers if balance drops below this = less than 6 months runway)

Wallet 2: Payroll Reserve

Purpose: Emergency payroll buffer (2–3 months of payroll set aside)
Starting balance: $30,000
Alert: Low-cash warning at $30,000 (triggers if buffer is depleted = emergency mode)

Step 2: Create one project with budgets

Project Name: Business review

Project-Level Budget: $25,500/month (total operating expenses: direct costs + payroll)

Why: Gives Daniel a "total cost of operation" view. If actual spending exceeds this, something is wrong.

Step 3: Create expense category and subcategories

Under the Business review project, create 1 Expense Category called Operating Expenses

Then create 3 Subcategories (each with its own budget):

Subcategory 1: Direct Costs

Budget: $10,500/month
Alert threshold: 90% (alert at $9,450 spent = 90% of budget)
Why: If direct costs exceed 90% of plan, Daniel knows margin is being squeezed. At 100% spent, he's hit his 35% cost-of-revenue ceiling.
Tracks: Freelancers, tool subscriptions, materials

Subcategory 2: Payroll

Budget: $15,000/month
Alert threshold: 95% (alert at $14,250 spent = 95% of budget)
Why: Payroll is almost fixed; Daniel wants early warning if he's approaching the ceiling (maybe headcount grew).
Tracks: Salaries and payroll taxes

Subcategory 3: Fixed Costs (if any)

Budget: $0 (or $X if he has fixed overhead)
Why: Might include rent, insurance, software subscriptions not tied to a project.

Step 4: Create income category and transactions

Income Category: Revenue

Does NOT need to be assigned to a project
Goes directly to Operating Account wallet

Step 5: Create January transactions

INCOME TRANSACTION:

Type: Income
Category: Revenue
Amount: $35,000
Destination Wallet: Operating Account
Date: Jan 31 (or distributed through the month)

EXPENSE TRANSACTIONS (all come from Operating Account):

Freelancer Payment
- Type: Expense
- Category: Operating Expenses → Direct Costs
- Amount: $7,000
- Source Wallet: Operating Account
- Date: Jan 15
Tools & Software
- Type: Expense
- Category: Operating Expenses → Direct Costs
- Amount: $3,500
- Source Wallet: Operating Account
- Date: Jan 15
Payroll
- Type: Expense
- Category: Operating Expenses → Payroll
- Amount: $14,800
- Source Wallet: Operating Account
- Date: Jan 31

OPTIONAL TRANSFER (for buffer):

If Daniel's margin was higher than expected, he might transfer surplus to Payroll Reserve.
Type: Transfer
From: Operating Account
To: Payroll Reserve
Amount: $2,000 (extra cushion)

Step 6: What alerts fire in January?

At the end of January, here's what Daniel's dashboard shows:

Wallet Alerts:

Wallet	Balance	Alert Threshold	Status	Notes
Operating Account	$90,000	$90,000	⚠️ TRIGGERED	At the runway threshold (6 months). Daniel needs to watch closely.
Payroll Reserve	$30,000	$30,000	✓ Safe	Buffer is intact (2+ months of payroll ready).

Project Budget Alerts:

Category	Spent	Budget	Percentage of Budget	Alert Threshold	Status	Notes
Direct Costs	$10,500	$10,500	100 pct	90 pct	⚠️ TRIGGERED	Exceeded 90 pct threshold earlier in the month; now at 100 pct (budget fully used).
Payroll	$14,800	$15,000	99 pct	95 pct	⚠️ TRIGGERED	Crossed 95 pct threshold (14,250); still under 100 pct budget.

KPI Calculations (Visible in Ambrosia Insights):

KPI	Formula	January Result	Target	Status
Runway	Operating Account / Monthly Burn	90000 / 15000 = 6 months	8+ months	At Threshold
Gross Margin	(Revenue - Direct Costs) / Revenue	(35000 - 10500) / 35000 = 70 pct	65 pct or more	Healthy
Payroll Cadence	Payroll vs Budget	14800 vs 15000	Stable	Predictable

What Daniel sees during his 30-minute review

Daniel opens Ambrosia and sees:

Dashboard Summary:
- ⚠️ Operating Account: Low cash warning (6 months runway—at threshold)
- ⚠️ Direct Costs: $10,500 (budget alert triggered — 100% of $10,500 budget; 90% threshold crossed earlier)
- ⚠️ Payroll: $14,800 (budget alert triggered — crossed 95% threshold at $14,250; still under 100% budget)
Interpretation:
- Runway is RED: His cash buffer is exactly at the danger line. If revenue drops even 10% next month, he'll have less than 6 months. Time to increase sales or cut costs.
- Margin is GREEN: 70% gross margin is excellent (he wanted 65%+). Margin remains healthy despite direct-cost overage.
- Payroll is NEAR CAPACITY: Payroll crossed the early-warning threshold (alert active), but it is still under the full budget this month.
Decision:
- Daniel decides to prioritize sales pipeline: He has 6 months to find new clients before runway becomes critically short.
- Alternative: Negotiate freelancer rates to reduce direct costs by 10% (bring them to ~$9,450), which would extend runway by 0.6 months.

Key takeaway: Why this setup works

Wallets = Cash position (how much money do I have?)
Project Budgets = Expense discipline (am I spending within my plan?)
KPI Calculations = Business health (can I survive? am I profitable? is payroll stable?)

The three layers work together. If Operating Account hits the low-cash alert, Daniel checks his project budgets to see where to cut. If a budget alert fires, Daniel checks runway to see if he can absorb the overage.

6. How this fits into a real financial system

Ambrosia lets you build this review system in one place, tracking actual transactions and cash flow.

A) Spaces

Daniel uses a Business Space separate from his personal finances. This keeps business cash, expenses, and income clear and distinct.

B) Wallets — money storage & saving

Daniel maintains:

Business Operating Account: For revenue deposits and payroll. He sets a low-cash alert at $90,000 (equivalent to 6 months of burn). If the balance drops below this threshold, Ambrosia alerts him.
Payroll Reserve: A buffer specifically for payroll, with a target of 2–3 payroll cycles funded in advance. He sets an alert if this wallet drops below the reserve target.

C) Projects — budget scopes

He creates a Business review project that tracks his KPIs.

Project: Business review
Category: KPIs
Subcategories: Runway, Gross margin, Payroll

D) Budgets — planning & limits

In his Business review project, Daniel sets recurring monthly budgets for:

Direct costs budget: Set to alert when direct costs reach 35% of projected revenue (maintaining 65%+ gross margin).
Payroll budget: Set to alert when actual payroll spend approaches or exceeds the monthly target, indicating headcount may not be sustainable with current runway.

E) Transactions & transfers

Every invoice is recorded as income in the Business Operating wallet. Every direct cost (freelancer payment, tool subscription tied to a project) is recorded as an expense. Ambrosia calculates and displays his KPIs in real-time:

Calculated runway alert: Ambrosia monitors Operating Account balance / monthly burn rate. When runway falls below 6 months, it alerts Daniel to investigate and act.
Real-time margin visibility: As transactions post, his gross margin updates automatically, showing if he's staying at or above his 65% target.

When revenue is strong, Daniel transfers the surplus to the Payroll Reserve wallet as a buffer.

F) Insights & alerts

Ambrosia combines wallet alerts (low cash), budget alerts (margin and payroll thresholds), and calculated condition alerts (runway less than 6 months) in a unified dashboard. Daniel knows immediately if any of his three KPIs are at risk, and he can respond proactively during his monthly review.

Persona Summary: Daniel is a small business owner focused on maintaining business stability, protecting his team's payroll, and understanding the financial health of his consultancy.

Suggested Follow-up Topics:

Scenario Planning: How to stress-test your runway.
Seasonal Businesses: Adjusting KPIs for revenue dips.
Raising Your Rates Without Losing Clients.