To run a successful business, staying on top of your company’s financial health is crucial – something which can be effectively tracked with the right financial data.
Tracking the right metrics isn’t just about keeping your books in order, it’s about unlocking the strategic insights that drive smarter business decisions.
Financial data gives you a clear picture of where your business stands and where it could go with optimised expenditure, reduced costs and the opportunity to reinvest.
By focusing on our five key metrics, you can identify strengths to build on and weaknesses to address, ensuring your business maximises its financial well-being and long-term profitability.
- Cash flow
The holy grail of commercial finance metrics, cash flow is a strong indicator of overall financial health and operational efficiency.
Calculated as the net amount of cash moving into and out of your business, a good cash flow ensures that your business is able to meet debts and other financial liabilities with its existing assets.
- Current ratio
A similar metric to cash flow, current ratio refers to the ability of your company to meet short-term obligations with liquid assets.
A ratio above one indicates that your liquid assets exceed expected liabilities, reducing the risk of defaulting on repayments or other costs.
- Profit margins
Your profit margin is a simple measure that shows you how profitable your business is at any given time – calculated as total revenue minus total costs.
A high profit margin can be an indicator that your business manages costs well and keeps expenditure to a minimum, while a low margin indicates a need to reduce or manage costs.
However, profit margin will be impacted by the market you operate in, your supply chain and the product or service you provide.
- Break-even point
Breaking even is an exciting point in the lifecycle of any business.
This is the point at which your revenue is sufficient to cover total costs – which doesn’t usually happen for a few months or even years.
Forecasting the point at which this is likely to happen will help you plan future investment and the allocation of resources.
- Staff costs
Staff costs can easily add up, particularly for labour-intensive businesses.
Staff costs as a percentage of revenue indicate what proportion of total income is being spent on staffing, calculated as staff costs / revenue x 100 = staff costs as percentage of revenue
This is a useful insight to have if you need to bring costs down or take on additional staff on a budget.
For further support in tracking key financial metrics for your business and incorporating data into your growth strategy, contact a member of our team to discuss your needs.
