You may have a gut feeling that your business is humming along smoothly — and you might be spot on. But there is no substitute for concrete numbers when it comes to measuring your business’ financial health. That’s where financial KPIs — key performance indicators — come in. KPI is a blanket term for the types of markers that businesses use to measure performance in a variety of areas, from marketing to HR to finance. Keeping close tabs on your small business’ financial performance is essential to long-term success. These financial KPIs will help you answer the question: Is my business meeting its goals?
- Gross Profit Margin : Your gross profit margin tells you whether you are pricing your goods or services appropriately. Your gross profit margin should be large enough to cover your fixed (operating) expenses and leave you with a profit at the end of the day.
- Net Profit : This is where the rubber hits the road. Your net profit is your bottom line — the amount of cash left over after you’ve paid all the bills. Financing is also a possibility to help smooth out seasonal fluctuations. Many companies go this route to keep things moving during the down season.
- Net Profit Margin : Net profit margin tells you what percentage of your revenue was profit. This metric helps you project future profits and set goals and benchmarks for profitability.
- Aging Accounts Receivable : If your business involves sending bills to customers, an accounts receivable aging report (most likely a standard report in your accounting software) can be eye-opening. Invoice financing is also an option that can help you capitalize on outstanding invoices.
Thrive knows the importance of your business’ health. Let Thrive monitor your KPI so you don’t have to and you won’t have to question if your business is meeting its goals.