Don’t Miss Out On These Crucial Financial KPI’s
Key Performance Indicators (KPIs) allow you to visibly see how your business is operating. They are measurable values that underline just how well you are meeting your business goals. As a company, it is crucial that you define the areas which require maintenance and growth, ensuring nothing is overlooked. The most important takeaway from using KPIs is allowing them to motivate action.
Let’s examine some areas of financial KPIs that you’d be wise not to ignore. With each item, you should always review the objective, analyzing current performance, set short and long-term KPIs, review the established targets, and lastly, review the progress and make necessary adjustments.
So, here’s the list of financial indicators you need to follow if you’re running your own business.
At the end of the day, a company’s success rests on its ability to maintain customer satisfaction. To help quantify a happy customer, businesses can use the Net Promoter Score (NPS), a measurement derived from brief customer surveys. With this score, you can equate rates of customer retention and referral generation.
How much cash do you have readily available? This KPI is the result of how much working capital you have versus all of your existing liabilities. Measures of your accounts payable, loans, and accrued expenses to name a few are subtracted from your short-term investments, accounts receivable, etc. Understanding this KPI paints a very clear picture of the state of your operating funds.
To establish your accounts payable status, you can use a KPI of accounts payable turnover. This measures how quickly you are paying your vendors. The ratio of interest is your total cost of sales by your payables. You’ll want to know the rate in which you are paying your suppliers. Maintaining a good relationship with them is a significant variable in the success of your business.
Where is your company positioned in the realm of growth and prosperity? A measure of your current ratio KPI will give you a figure by dividing your total assets by total liabilities. If you are able to meet your financial obligations, maintain timely payments, and keep a respectable credit score – you’re in good shape.
Debt to Equity
A business must accumulate debt in order to acquire growth. The degree of debt to equity is a fundamental KPI your business should be measuring. You’re essentially finding the ratio of how much of your shareholder’ investments are you using to fund the growth of your business.
As a company, you want to have a clear picture of where you stand, so you know where you’re capable of going. Insights from using your designated KPIs allow you to implement a plan of action, so you can highlight your strengths and rectify your errors. Contact Tobin & Collins to help get your financial picture as perfect as can be!