5 Essential Financial Metrics Every Business Should Track

When it comes to monitoring business metrics, it’s not enough to simply glance at surface-level numbers. This is because the typical profit and loss statement doesn’t provide you with enough information and is only retrospective in nature. Instead, if you want to turbo-charge your business, you need to take a deep dive into important metrics that fuel its success. This will help you truly understand the health or trajectory of an organisation. But which business metrics should you focus on? In this article, we will explore five key financial metrics that every business should diligently monitor. By keeping a close eye on these metrics, you can make informed decisions and steer your business towards sustained growth.

Note: if you’re not tracking these, you could be risking your business.

1. Net Cashflow: develop a cashflow forecast – it is the lifeblood of business

A detailed and educated understanding of your cash flow (i.e. money in versus money out) is paramount to business success.  You should not solely rely on your current bank account balance. That can be misleading, as it overlooks current and future obligations which are both needed for effective decision-making today. A comprehensive cash flow forecast provides a clearer picture of your business’ true financial health and future trajectory. By identifying and addressing cash flow gaps in advance, you can put funding options in place ahead of time, wind back spending, bring forward or push back activity, and avoid potential crises so as to maintain the stability of your operations.

2. Breakeven point: when profitability kicks in

Determining your breakeven point is essential for assessing the profitability of your business, and it can be more complicated than it seems. It involves understanding both your fixed and variable costs, as well as your pricing strategy not just today but into the future. By identifying your committed monthly costs and evaluating your cost of service, you can accurately calculate your breakeven point.  This crucial business metric helps you understand the minimum revenue needed to cover expenses and make informed decisions about pricing, cost management, employee numbers and revenue generation.

3. The costs of customer acquisition and customer retention: growth from within

As a business, it’s easy to turn all your attention toward acquiring new customers, which is no doubt important, but understanding customer retention and the lifetime value that can be gained from keeping existing customers is equally vital.  By assessing the lifetime value of your customers, analysing their purchasing patterns and identifying strategies to enhance customer loyalty, you can generate consistent growth from within. It may be far cheaper to keep and grow your existing customers by providing increased value that meets their evolving needs than it is to constantly seek out new customers.

4. Profitability over revenue growth: finding the balance

Have you heard the saying: “revenue is vanity, profit is sanity”? A high revenue figure does not guarantee a healthy bottom line. That’s why although revenue growth is often seen as a measure of success, it’s essential to examine actual profitability alongside it.  By evaluating your costs, including employee-related expenses and overheads, you can determine if your revenue growth is sustainable and also gain valuable insights into the effectiveness of your resource allocation and overall operational efficiency.

5. Identifying growth drivers and tracking their metrics: what’s moving the needle?

To fuel sustainable growth, it’s crucial to identify the key drivers behind your business’ success and double down. By analysing various factors such as:

  • subscriber numbers, 
  • website traffic, 
  • conversion rates, 
  • average sales, 
  • number of products purchased per customer, 
  • revenue per employee,
  • and many others,

you can pinpoint the specific elements that are propelling your growth and then allocate resources effectively, make informed investments, and capitalise on the most promising opportunities.

Not sure where to start? Dexterous can help

We provide an outsourced finance department solution that works for you. With years of experience, we are experts when it comes to providing these key metrics and helping you use them to make informed business decisions. So, when it comes to navigating the competitive business environment, we are your value-add solution, offering:

  • In-depth cash flow forecasting so that your SME can stay above water
  • A scalable, flexible and innovative solution 
  • A comprehensive team of industry specialists who can manage your finances according to your unique needs.

Do you want an expert finance team that helps you proactively manage your cash flow and financing?

At Dexterous, we’re your growth-focused outsourced finance department. We provide you with a modern and effective alternative to building and running your organisation’s finance department. With our Financial Department as a Service solution, we offer you full access to our team of corporate finance professionals, from CFOs to Bookkeepers, Accountants to Payroll, Receivables to Payables and beyond. We want to empower you to build a bespoke financial team tailored to your business’ needs and one that collaborates with and grows alongside you.

We also equip you with a strategic approach and cost-effective function not just to address the challenges of a potential recession today, but to help you achieve more growth in the future by better navigating the competitive fundraising and lending environment. Reach out to Dexterous and transform your finance department today. For more information, get in touch with us today or connect with us via LinkedIn.