Home Business Never Losing Sight of Where You Stand: 6 Key Performance Indicators You Should Track in Your Business

Never Losing Sight of Where You Stand: 6 Key Performance Indicators You Should Track in Your Business

by Olufisayo
Key Performance Indicators You Should Track in Your Business

Small business owners often run the risk of being buried in the day-to-day that they can quickly lose sight of where their business stands. This is where tracking key performance indicators (KPI) can help to keep you on track and inform you to whether your efforts are paying off. KPIs can also be instrumental in helping you determine if you’re spending too much of your time on something that isn’t worth it.

Here are six key performance indicators that you need to track, so you never lose sight of where you stand.

Key Performance Indicators You Should Track in Your Business

Cash Flow Forecast

Your cash flow forecast will allow your business to assess whether their sales and margins are appropriate, making them one of the most important KPIs for your business to track. Savvy small business owners regularly perform cash flow forecasts so they can identify problems in the early stages and make the necessary adjustments.

Outstanding Revenue

A significant impact to your company’s cash flow and your ability to pay your bills is whether or not you are doing an excellent job of billing and collecting from your customers. If you don’t keep the proper records, it could be months before you realize that you have outstanding invoices. To keep up on your accounts receivables, the experts at QuickBooks suggest following up on your receivables and applying payments to your invoices monthly.

Gross Profit Margin

A business can’t achieve success if it is paying more money to its suppliers than it is netting in sales each month from customers. Gross profit margin as a percentage of your sales is an expression of the total profits as they compare to your revenue. Tracking this KPI over time with a business management software like NetSuite will allow you to easily quantify how much money you are keeping compared to how much is being paid to your suppliers. With an informative guide about NetSuite pricing, your business can be well on its way to tracking its gross profit margin.

Revenue Growth Rate

Your revenue growth rate refers to the rate that your company’s sales growth or income is increasing. When you calculate and track your revenue growth rate on a regular basis, you can determine whether the growth of your business is growing, decreasing, or remaining the same. You can then use this number to make the changes that are necessary to stay profitable.

Customer Churn Rate

The only way you will be able to stay in business is if you have customers willing to pay for your products or services. Your churn rate is the rate that you lose customers every month. If you have a high percentage of churn, then you have a problem that you will need to fix right away, advises Scoro. Tracking customer churn is critical if you want your business to grow.

Inventory Turnover

Inventory turnover measures when your inventory is sold or used during a period, revealing your business’s ability to move goods. Calculating your inventory turnover ratio can help to measure and plan for inventory adjustments as needed.

Your company won’t be able to make adjustments to its strategy if you don’t know where your company stands. Tracking these six KPIs on a regular basis will allow you to measure the factors that are affecting your growth and give you the information to make any necessary adjustments.

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