Accounting metrics and KPIs are critical components of business management. For every business establishment, whether big or small, bookkeeping and accounts are two important aspects. A proper record of the cash flows, expenses, and gains cannot be talked about enough.
If captured and monitored properly, accounting metrics are the indices that a business can use to determine its success in various aspects. They are indicators of performance or lack thereof.
There are many accounting metrics, though some are a little more technical than others. The big question is, which ones are the most useful?
Some accounting metrics are aptly described as vanity because they do not reflect actual business growth despite being measurable. There are both financial and non-financial accounting metrics. Accounting metrics may revolve around cash, clients, and members of staff, or a combination.
Understanding these accounting metrics will help with business decision-making, as these metrics can be as beneficial to your business as other types of metrics, such as business metrics, sales metrics, financial metrics, and more.
To be useful to you, you must recognize how these accounting metrics can benefit your business.
Specific businesses have specific needs. However, some of these may be applied across the board. Remember that you do not need to buy expensive accounting software or powerful invoice apps just to monitor these metrics, as every business owner should do.
These metrics can be seen as performance metrics since they contribute to a company’s overall revenue and net profit performance. Let’s take a brief look at the top 10 accounting metrics you should be monitoring and why.
The most basic and the most important. Keep a close eye on this metric.
This goes beyond profit. It simply captures the two-way movement of money through your business account… in and out.
When your OCF is placed side-by-side with the gross capital invested, a true image of the actual state of things becomes clear.
Here’s why we should monitor cash flow.
This refers to your cash on hand. The working capital is accessible, liquid, and available when you need it.
To arrive at your working capital, you must also consider short-term debts, running costs, and any loans taken to sustain your business.
Why monitor this?
The sum of outstanding bills owed by the business and your short-term debts in figures. This is not an asset but a liability.
Why you should monitor this:
This is the money your customers owe you. To keep this low, try encouraging your customers to pay early or on time.
Goods and services bought on credit would also be included in accounts receivable.
Why Monitor This?
This is a natural part of accounting metrics because it is specific to one product or service that you have rendered.
This should be calculated to cover both the cost of the material and workmanship. The direct costs should be kept low.
Why should you monitor this?
This shows how good a company is at generating income from running its day-to-day activities. You get this number after subtracting the cost of product development, advertising, and other business costs.
Why calculate this?
If you subtract taxes and interest from operating income, you are left with the net profit.
Why calculate this?
This is the rate at which a business is eating into its cash reserves or cash balance.
Technically, this is how much of your cash stores that you’ve used up.
Why should you monitor this?
A measure of customer satisfaction. This metric recognizes that the customer is king. The NPS is calculated using different levels of positive reviews from customer surveys. This might also involve engagement metrics or social media metrics from social media activity. This is a good key performance indicator to see if the customer lifetime value standards are met.
Why monitor this?
This metric compares the business’ net income to its net worth to determine whether the latter is a fair deal.
Why is this important?
These metrics can be very hard to track if you do not have a unified system of dashboards that can help you determine if any of these accounting metrics are doing fine or if any of these are in danger. When you have that dashboard system keeping all the figures organized and compiled properly, it would be very easy for you to check these numbers and act accordingly when something happens.
DashboardFox is not a replacement for your accounting system, or the core reports you get from an accounting system such as Income Statements and Balance sheets.
But for calculated metrics such as the ones discussed in this article, connecting DashboardFox to a data source that contains the information needed to calculate these metrics can be made easier with DashboardFox. Most importantly, the secure communication of these to your team and their ability to filter, segment, and slice and dice to gain insights is where DashboardFox shines.
Many leading dashboard and business intelligence products appear to be low cost when you look at a per-user basis. But the catch, it’s per user per month. And when you have a lot of users, that adds up, and, over time, per month, just continues to be a drain on your cash flow.
With DashboardFox, you can get everything you need for your accounting metrics without shelling out thousands of dollars. For one, we run on a one-time payment basis, so once you pay the one-time payment, that’s the only time you’re shelling out money to get high-quality results. We are living proof that the best things in life are still within your budget.
Aside from saving you money, we also want to save your valuable time, because we know how time works in any business. With DashboardFox, you can whip out dashboards containing everything you need to know, without hiring someone to interpret the data, prepare the tables, publish the dashboards, collect data, and more. You get to save your resources, allowing you to focus on what you have to do.
Why don’t you give us a call or, better yet, schedule a live demo to see that we are not just all talk? To see is to believe, and we want our actions and commitment to speak louder than words. We’ll be waiting for you.
