• Twitter
  • LinkedIn
  • Facebook
  • Instagram
  • Youtube
Login  | Call now: (800) 780-7133
Kapitus
  • Problems We Solve
  • Products We Offer
  • Partner With Us
  • Blog
  • APPLY NOW
  • Search
  • Menu Menu
key-financial-metrics-all-small-business-owners-need-totrack

Key Financial Metrics for Small Business: The Numbers You Need to Track

June 26, 2019/in Cash Flow Management, Operations /by Bernadette Abel

Just as drivers watch the instrument panel on their cars when driving, small business owners should continuously monitor the performance metrics of their company. An owner needs to know what’s working and what’s not. That’s part of managing a business. Just like it’s part of driving a car.  A water temperature gauge that goes into the red zone needs immediate attention; same with a financial metric that indicates the company is running short of cash. Key financial metrics for small business fall into four primary categories:

  • Profits
  • Liquidity
  • Leverage
  • Efficiency

Within these four categories, there are seven core metrics that act as the most important key performance indicators when it comes to cash flow:

Key Financial Metrics for Small Business

Measures of Profits

Revenue – This may seem obvious, but without revenue, nothing else happens, especially profits. And all revenue starts with sales. So, the first metric to watch is your most recent sales number; it could be daily, weekly or monthly, depending on the type of business,

Are your sales at the level they need to be? Comparisons of sales figures to the budget will help to keep everyone on course to reaching the revenue goal.

Gross profit margin– The gross profit margin is an early measure of a company’s efficiency of operations. It shows how efficiently a company uses its raw materials and direct labor to make and sell a product or service at a price that produces a gross profit.

The gross profit margin must be enough to pay all fixed overhead expenses and make a profit. In some industries, a gross profit margin of 25 to 30 percent may be enough; others need a gross profit of 50 percent or more. A calculation of a company’s profit plan or break-even revenue level will determine the required gross profit margin for your business.

EBITDA – It’s nice to know you’re making a net profit, but the real test is EBITDA. That’s earnings before deductions for interest, taxes, depreciation and amortization. EBITDA reveals the true operational profits of a business without the effects of financing costs, taxes and non-cash accounting entries.

Monitoring EBITDA is important because it is an indicator of the cash flow from operations.

Liquidity to Support Operations

Current ratio– Your current ratio is current assets divided by current liabilities. The timing of the cash flow cycle from inventory to receivables to cash is not perfect. Inventory can be slower to sell and turn over; customers can take longer to pay their bills.

On the liabilities side, expenses and bills to suppliers have specific amounts and due dates – there’s no mystery, there. For this reason, you need more current assets than current liabilities. A good, comfortable ratio is to have $2 in current assets for every $1 in current liabilities. Having less could indicate that you may begin to have problems paying bills on time.

Tracking the trend of your current ratio can provide advance warnings of upcoming cash flow problems, especially if the ratio drops below 1.5.

Financial Leverage

Debt-to-equity ratio – Some debt is good; it increases a shareholder’s return on investment. But too much debt can be dangerous. Lenders have strict schedules for principal and interest payments, and they expect to receive them, regardless of the company’s cash flow availability.

Efficiency of Operations

Accounts receivable aging – The accounts receivable aging metric keeps track of all unpaid customer invoices and/or credit memos. While most customers will pay their invoices before due dates, sometimes clients can run into problems – whether their own cash flow issues or poor record keeping – which keep them from paying you in a timely manner. You should try to track invoices in 30 day buckets (30 days overdue, 60 days overdue, 90 days overdue, etc) so that you can use this information to prioritize collections procedures.

Inventory turnover– Inventory represents a significant investment for most businesses, so turning inventory into sales quickly is important. Turnover is the number of times a company buys, sells and replaces its inventory in a year. It is calculated by dividing annual cost of goods sold by the average inventory level. Depending on the industry, inventory turnover rates can reach up to 10 to 12 times per year.

A decrease in turnover could be a signal that some products are not selling well, and prices should be marked down to move them out.

Owners who regularly monitor these key financial metrics for small business will have a good sense of the pulse of their business, while enabling them to quickly spot potential problems and take corrective actions before they become detrimental to the health of your business.

Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail
https://kapitus.com/wp-content/uploads/2019/06/key-financial-metrics-all-small-business-owners-need-to-track.jpg 1457 2200 Bernadette Abel https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Bernadette Abel2019-06-26 11:13:112022-04-07 18:12:39Key Financial Metrics for Small Business: The Numbers You Need to Track

LATEST FROM KAPITUS

  • To Rent, To Lease or To Buy:  Obtaining Expensive Equipment for Your Business
  • What Type of Financing is Best for Your Small Business?
  • Essential File Management Tips and Trends
  • Should You Take Out a Business Loan? Consider this Checklist
  • How to Strengthen Your Small Business’ Company Culture

Subscribe To Our Blog For More Tips On How To Grow Your Business

Categories

  • Accounting & Taxes
  • Business Expansion
  • Business Loans
  • Business Productivity
  • Business Productivity
  • Cash Flow Management
  • Claim Your Corner of the Internet
  • Company News
  • Featured Stories
  • Financing
  • Human Resources
  • Industry Center
  • Leadership
  • Legal
  • Living Your Best SBO Life
  • Making Her Mark – Influential Women Business Owners
  • Monthly Must Reads
  • News
  • Operations
  • Raising Capital
  • Recruitment
  • Risk Management
  • Sales and Marketing
  • Tax Center
  • Tax Legislation
  • Technology
  • Technology Center
  • Uncategorized

About Us

  • Media Center
  • Team
  • Careers
  • Events
  • Success Stories
  • The Kapitus Difference
  • Developer Documentation
  • Blog

Products

  • Revenue Based Financing
  • Helix® Healthcare Financing
  • Business Loans
  • SBA Loans
  • Line of Credit
  • Invoice Factoring
  • Equipment Financing
  • Purchase Order Financing
  • Concierge Services

Contact Us

  • (800) 780-7133
  • Email Us

Signup For Our Newsletter

[email protected] Kapitus, LLC or its affiliates. All rights reserved. Kapitus, LLC, Kapitus.com, and the Kapitus logo are registered trademarks of Kapitus, Inc. or its affiliates. | Loans made in California are issued by Strategic Funding Source, Inc. dba Kapitus, pursuant to California Finance Lenders License No. 603-G807.
Sitemap | Terms & Conditions | Privacy Policy
  • Twitter
  • LinkedIn
  • Facebook
  • Instagram
  • Youtube
Boost Productivity with Mini Escapes boost-productivity-with-mini-escapes three-ways-to-evaluate-a-capital-investment 3 Ways to Evaluate a Capital Investment
Scroll to top
  • Whether you want to learn more about our financing options, are interested in becoming a partner or just have a general question, we’re here to help! Simply fill out the form below and we’ll get it directly into the inbox of the right person.

Step 1 of 4 - Tell us about you

25%
  • Sign up for the Kapitus Partner Program!

  • Sign up for the Kapitus Partner Program!

  • Sign up for the Kapitus Partner Program!

  • Sign up for the Kapitus Partner Program!

Step 1 of 10 - TELL US ABOUT YOUR PRIMARY FINANCING NEED

10%
  • Find the right financing product for you.

    Answer a few questions and we’ll match you with the best product based on your needs and current situations.

  • 1. Answer a few questions. You let us know some basic information about your financing needs, so we can find a match.
    2. See your financing matches. You'll get matched with up to four financing options based on your answers.
    3. Apply for financing. You can apply for all of your financing options by completing one simple application and providing a few documents.
    4. Get an Advisor: You have the option to be assigned a financing specialist to help guide you through the application process.
    If you are looking to determine the best financing option for you, our matching tool streamlines the process and arms you with information that you can use before you apply. To match you with your best options, we ask you to answer a series of basic questions about your existing and future needs, current financial health, and your financing preferences – including amount to be financed, ideal terms and financing urgency. Our system then finds you up to four financing options to fit your needs. Once you’re matched, you can expect to be contacted by one of our financing specialists to help you navigate the application and selection processes.
  • Find your financing match


  • Each financing product has its own minimum and maximum requirements around the amount of money that can be acquired through that option.
  • Find your financing match



    • Business Accountants
    • Marketing & PR Agencies
    • Commercial Cleaning Companies
    • Printers
    • Human Resource & Payroll Firms
    • Office Supplies Organizations
    • Salons/Spas
    • Gyms & Other Workout Studios
    • Pet Services Companies
    • Personal Accountants
    • Home Cleaning Companies
    • Residential Landscaping
  • There are financing options created to meet the specific needs of particular industries.
  • Find your financing match

  • Thank you for reaching out to Kapitus. Unfortunately, our financing products are only available for existing businesses and we will not be able to help you at this time.


  • The amount of time your business has been in operation is a deciding factor in the type of financing options available to you.
  • Find your financing match


  • Each financing product has its own minimum requirement for the amount of revenue being brought into a business on either a monthly or an annual basis. In addition, your monthly and/or annual revenue can dictate the length and term on your financing option.
  • Find your financing match


  • Each financing product offers different payback lengths and terms.
  • Find your financing match


  • Each financing product has different paperwork and underwriting processes. As a result, the amount of time it takes to get approved for one type of financing over another can vary significantly.
  • Find your financing match

  • Find your financing match


  • There are financing options for every credit type, however your personal credit score will determine your eligibility for each financing type.
  • We’re finding your match