Read Xero reports to protect runway

Why this matters

Revenue can grow while margins rot and cash quietly drains. Dashboard totals won't warn you; the monthly Profit and Loss and cash reports will. Founders who never open reports learn about problems from their bank balance.

What "done" looks like

• A monthly 30-minute review right after reconciliation
• You can state gross margin, monthly net profit or burn, and months of runway from memory
• Months compared against each other, not read in isolation
• Every review ends with one concrete decision or follow-up

How to do it

1. Run the Profit and Loss (Accounting > Reports) comparing the last three months.
2. Check gross margin first — revenue minus direct costs, as a percentage. A shrinking margin with rising revenue is a warning, not a win.
3. Scan operating expenses line by line for creep: subscriptions, fees, anything growing faster than revenue.
4. Open the Balance Sheet: cash, accounts receivable (who owes you), accounts payable (who you owe).
5. Compute runway: cash divided by average monthly net cash outflow.
6. Write down one action — chase an overdue invoice, cut a subscription, reprice — and do it before next month.

Common mistakes

• Watching revenue only; profit and cash are what keep you alive.
• Confusing profit with cash — an invoiced sale on the P&L isn't money in the bank until it's paid.
• Skipping the review in busy months, which are exactly when numbers move.

Real-world examples

• Xero's P&L and Balance Sheet are built into every plan, and Xero Analytics adds a short-term cash flow projection and business snapshot on top.
• CB Insights' startup post-mortem analyses consistently rank running out of cash among the top reasons startups fail.

From a founder's point of view

The first few monthly reviews feel like homework. Then the numbers start forming a story — which products carry the business, which costs creep, how long the cash lasts — and decisions stop being gut calls.

Rule of thumb

If you can't state your gross margin and months of runway without opening Xero, you haven't read your reports recently enough.