As a business owner, it’s important to consistently have a clear view of the current state of your finances to drive the direction and strategy of your company. To accomplish this, many owners rely on tracking and analyzing specific key performance indicators (KPIs) or metrics to better illustrate the financial performance of their company at any given time and inform their business decisions.
It’s standard for businesses to track universal metrics like average sales, gross profit, etc., but there are countless other KPIs that can paint a clearer picture of your business’s financial situation. Not sure which KPIs you should be tracking that determine your financial health? The crucial ones may vary depending on your business industry and structure, but here are a few key ones that should be monitored on a regular basis:
- Cash Runway: The amount of time your funds will last at the current cash burn rate.
- Zero Cash Date: The predicted date that your business will run out of funds given the current rate of spending.
- Operating Cash Flow Ratio: A measure of how many times a company can pay off its current debts with the cash made within the same period of time.
- Revenue per Employee: A rough estimate of how much money each employee generates for your business.
- Current Ratio: A ratio used to determine a business’s ability to pay its short-term obligations, typically those due in one year’s time.
- OpEx as % of Revenue: Illustrates how much money it costs to run a business against how much money is being made by that business to determine how effective or ineffective management is.
- Headcount Distribution Ratio: Also known as the sales-per employee ratio, this KPI illustrates the efficiency of businesses that rely on people to generate revenue, like retailers. It essentially measures how many sales are being made by each employee.
- % of Salary by Department: The percent of a business’s overall budget that is allocated to each department within a business.
- Current Accounts Receivable: This shows the current money that is owed to a business by its debtors.
- Current Accounts Payable: This shows the current money that is owed by a business to its creditors.
These KPIs are great for helping a business understand its cash flow, where expenses are coming from, just how much revenue is being generated, and by which teams or individuals. They also help business owners determine how financially sound their operations are so that adjustments can be made if necessary.
You can amplify the power of your KPIs by using software that can not only track your metrics but visualize your data on dashboards so that you can interpret your data timelier, and better forecast what the future may hold. Dashboards allow you to customize how your KPIs display so you can analyze both historical and predictive data at a glance. They also provide a full picture view of how your business is performing financially so that you can target the areas that need improvement and analyze the areas that are succeeding—leading to increased growth and productivity.
At BerganKDV, our Business Intelligence and Analytics offering uses innovative technology that can help you unlock the financial clarity you need to drive your business forward. Our robust solution includes KPI tracking, real-time dashboards, financial forecasting, budgeting, comparison reporting, workforce planning, cash flow analysis, and more! When you partner with BerganKDV to evolve your business processes, you are also gaining the trusted advisory of our FAAST team that can help you optimize and apply your data findings so that your business is future-ready. Want to learn more about what our BIA solution can do for you? Let’s talk about it!
The post Which KPIs You Should Track to Assess Your Business’s Financial Health appeared first on BerganKDV.