Do you feel overwhelmed with all the numbers you see on your dashboard? 

If yes, that’s normal. Number overload can paralyze you in making informed decisions. It’s a love-hate relationship — you’d like to know your financial standing but doing so feels like a task you’d willingly procrastinate whenever you find something else to do.

But let us tell you this: managing your small business KPI dashboard doesn’t have to be a chore. Instead, it should be a painless, somewhat enjoyable experience to understand your numbers and see if you’re on the track with your goals.

To achieve this, we list key financial metrics for small businesses to focus on, including some tips on how you can set your own key financial metrics.

 

What are Key Financial Metrics?

Financial metrics are measurements used to track, monitor and assess the financial performance of different business activities. Whereas your key performance indicators (KPIs) are specific to your key targets, your financial metrics provide general information about your business.

By selecting your key financial metrics, you can set realistic KPIs, make educated business decisions and gauge the progress of your business.

 

Key Financial Metrics for Small Businesses

Key financial metrics for small businesses and startups fall into two categories:

  1. Operational Metrics
  2. Sales Metrics

Check which of the metrics below apply to your business based on your targets.

 

Operational Metrics

Operational metrics are useful in determining your profit margins and improving organisational productivity.

  1. Break-even – This metric will help determine if your business can cover all its expenses and when it can begin making profits.
  2. Burn rate and runway – The burn rate shows how fast you’re using cash monthly to finance your company’s operations. Runway, on the other hand, is a metric that shows the amount of time you have left before your company runs out of cash based on your burn rate.
  3. Cash operating cycle – Measures the length of time it takes from investing in production (raw materials, wages, etc.) to generating revenue from the finished goods. The shorter the cycle, the better since it means you have good working capital management in place.
  4. Operating cash flow (OCF) – OCF tracks the movement of cash in and out of your business, excluding revenue from interest or investments. When you have good OCF, this means your business income can support itself without additional loans or outside investments. 
  5. Profit and loss (P&L) – P&L is a type of financial statement that you also need to include on your dashboard. It summarises the revenues, expenses and costs your business has incurred during a specific period.
  6. Customer lifetime value (CLV) – Your customers’ lifetime value represents the total worth of a customer to your business during their lifetime. It measures how much a customer is willing to spend on your products and services. Measuring CLV gives you an idea of how much you should spend on acquiring new customers and how much you can lose if the loyal ones stop doing business with you.

 

Sales and Marketing Metrics

These metrics tell you the effectiveness of your sales and marketing strategies, including how well both teams work together.

  1. Sales revenue – It refers to the amount of money you’ve received from product or service sales during a specific period. 
  2. Net profit – Also known as the bottom line, your net profit is the amount of money left after deducting business expenses from your sales revenue.
  3. Sales growth rate – This metric measures your sales progress in terms of its increase in revenue during a fixed period. A low sales growth rate means you should revisit your sales strategies while a high growth rate indicates that your strategies are effective.
  4. Average monthly leads – Identifying the average number of leads you get over a month is helpful when setting targets for your marketing team.
  5. Average lead conversion rate – Calculating this metric will help you predict the number of customers your business will have based on your historical data. It’s also a good way to set goals and targets for your sales team, and for your marketing team to know the quantity and quality of leads they should bring in.

Rather than computing these metrics manually, we recommend the use of cloud accounting software. Aside from automating time-consuming tasks, it also features a dashboard where you can easily view reports of your financial metrics.

 

How to Choose Metrics for Your KPI Dashboard

The list above only shows the sample metrics you should track. It’s still better to set your metrics based on your actual needs, targets, and business types. Here are some tips for choosing the right metrics for your business:

  1. Identify and set your key goals/targets.
  2. Select metrics based on goals and targets.
  3. Review the numbers which you regularly use. Chances are those numbers are the key metrics you should include on your dashboard. 
  4. As much as possible, track only financial metrics that help you with decision-making.
  5. Cut the numbers clutter by removing unnecessary metrics.
  6. Work with an accountant to determine which metrics and KPIs you need to generate insightful reports.

If you need professional help in setting up your dashboard, contact us today. Backed with their extensive knowledge and experience in the field of accounting, our accountants and bookkeepers are experts in various cloud accounting software and business intelligence tools. For more information about our services, you can also visit our website.