Did you know that there are five common key performance indicators? These include revenue growth, revenue per client, profit margin, client retention rate, and customer satisfaction.
You will notice that multiple of these include looking at your business’ financials. Keep reading, and we will guide you through why financial metrics are essential and how to measure them.
Why Financial Metrics are Important
Financial metrics are important because they are vital to measuring your business profitability and performance. To measure your company’s growth and success, you need to know that you’re consistently making money and can continue paying people and growing.
An essential tip is that companies think they will save time and money doing their bookkeeping and measuring these metrics. However, if you don’t have the skills to do it correctly, it may affect the way you want to run your business.
It can be easy to fall behind and very tedious, and it’s so important to keep up with your company’s financials. If something has gone wrong and there’s no cash flow, you may not notice until it’s too late.
The Accfin Group can help you find bookkeeping services, so you don’t have to worry about hiring the right people to do it or doing it yourself.
If you outsource, you can rest assured that you will have your performance tracked and focus on making critical business decisions.
How to Measure Them
You want to measure revenue growth, revenue per client, and profit margin. You should also calculate ROI before making decisions to see if there’s a good return on investment.
You can calculate the below by:
- Revenue growth: Subtract the previous quarter’s revenue from the current one and then divide by the number of the last quarter’s revenue
- Revenue per client: You want to look at the average revenue per user or client, which depends on what package they have and what their payment plan looks like
- Profit margin: You need to subtract the cost of goods sold from the net sales (returns, allowances, and discounts)
- Return on investment: You divide net income by the capital cost of the investment
You can measure success quarter over quarter to see if you’re improving in each of these categories. This will help you see if your company is moving in a positive direction.
You will know something is wrong if you look at these quarter over quarter and consistently check on growth. You should also use these metrics to let your employees know how you’re doing and keep up with transparency.
Organize Your Financial Metrics
Now that you know the importance of measuring your financial metrics, you need to take inventory and keep track of them.
You can outsource a bookkeeping team so that you don’t have to focus on actually calculating the metrics; you can just use them to evaluate how your company’s doing and make critical decisions.
Start getting your performance metrics in order or contact The Accfin Group for more information on how to outsource your bookkeeping team and what they can do for you.