When you decide to open up your small business, you will be quick to find out how much work it entails. Part of being successful in your business is being aware of the financial health of your small business. It is crucial is making financial decisions for your business and ensuring that you are attaining long-term sustainability. There are several key financial metrics that can help you determine the health of your small business. Mark Dicus & Company would like to walk you through them.
What are Key Financial Metrics?
It is important that you are aware of what financial key metrics you should be looking at closely when you have a small business. This can help you better understand how your business is doing.
– Revenue: Obviously, the revenue your business brings in is the life of your business. This is why it is the first on the list and the most important metric that you need to be tracking.
– Profit Margin: Revenue isn’t the whole story though. You need to look at the profit margin to see how effectively you are turning your revenue into profit.
– Cash Flow: This is how money is moving in and out of your business. You have to have cash flow on hand to cover expenses needed to run the business.
– Accounts Receivable: You need to keep track of this metric to ensure your customers are paying you. It helps you keep the cash flow that you need on hand. Knowing how often and the frequency of your accounts receivable help you to better understand how quickly you’re able to pay your bills.
– Accounts Payable: This is the money that you owe your suppliers and your vendors. Again, keep track of this to see how quickly you are able to pay your bills and keep your business afloat.
– Debt-to-Equity Ratio: This metric will measure the balance between the business’s borrowed funds and the owner’s equity. It will help you understand your business’s financial leverage.
– Gross & Operating Margins: The gross margin is the percentage of revenue that you have after deducting the cost of goods sold. Operating margins is a calculation of all the operating expenses for the business including utilities, salaries and more.
– Break Even Point: You need to know where your break even point is. This is the place where your business covers all the costs. You aren’t making money, but you aren’t losing any either.
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It can be incredibly challenging to own and run a small business. You definitely need to have the right professionals on your side. At Mark Dicus & Company, we will help ensure these metrics are being followed closely as we help you be as successful as possible. Our business consulting ensures you’re on the right track. Call us today!