4 Vital Financial Metrics You Should Track Month to Month

Running a business is exhausting – and the last thing you want to do at the end of a hard day is pore over financial statements. However, losing track of key financial metrics is a huge mistake, one that can lead to money flying out the door, and worse.

Here are four charts you need to keep tabs on every month.

Sales

Without sales there is no business. Track your top 3 to 5 products/services every month to see how your best offerings are performing.

When sales dip, do your best to try and figure out why. When sales boom, dig deep and determine which drivers are behind the push.

Once you’ve pinpointed your most effective sales drivers, track these, too. Maybe it’s hits to your website, maybe it’s sales calls, maybe it’s running an ad in your local newspaper. Whatever it is, you can’t know which sales growth strategies are most efficient unless you crunch the numbers monthly.

Profit

Revenue is great but it’s not always indicative of a business that’s in the black. Net income is where the money’s at and so you need to check your P & L Statement every month to be sure that revenue exceeds costs.

You should also track profit margin. While every industry is different, 10% is generally considered a benchmark minimum goal to shoot for.

If you’re following profit and see that your margin has dropped below ten percent, this is a sign that you need to boost sales, cut costs or both.

Cash Flow

At the end of every month ask yourself these three questions:

  1. How much money did the business have at the beginning of the period?
  2. How much money does the business have now?
  3. What happened to the difference?

Profit over the long haul isn’t everything. A business needs a consistent influx of cash to pay the bills and cover operating expenses. Revise your Cash Flow Statement to ensure you’ll have the resources you need to keep the lights on.

Total Inventory

Tracking inventory is important for two reasons:

  1. If inventory is low, you may not be able to restock in time to meet demand.
  2. If inventory is high, this could be a sign that something is causing a drop in sales.

Excess inventory means unnecessary storage costs and potential waste. Inventory shortages lead to unfulfilled orders and unhappy customers.

Nip these issues in the bud by monitoring inventory numbers regularly.

Software for the Win

Staying up to speed with your company’s financial statements doesn’t have to be a nightmare. Accounting software solutions, such as QuickBooks, take the sting out of financial reporting and analysis.

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