Running a financially successful company is oftentimes much more complicated than simply turning a profit at the end of the year. With investors, shareholders, debts and equity, there is a lot to keep track of in figuring out exactly where you stand financially. Metrics and measurements are one of the best tools you can use to be consistently informed of your company’s financial standing, and can easily be churned out of an automated process so that they are easily accessible anytime you want to check in.
Start by asking some key questions
The metrics and measurements that apply to your business and its assets are unique to your enterprise. You need to begin by asking yourself a few important questions to get a feel for which metrics and measurements will help you get the best picture of your business. Ask yourself things like:
- What financial information is central to my company’s success and how can I keep track of it and produce regular reports?
- Do I have the right tools to be able to achieve this goal?
- How often do I want reports on these metrics and measurements?
- Is there a way to visualize this information so I can assess my business’ finances more accurately?
Start by answering these questions for yourself them pose them of other leaders in your company as well as your advisers. Outside eyes will help you see things you might overlook, as well as pair things down.
Four metrics and measurements to consider
- Balance sheet liquidity Liquidity on your balance sheet is always in cash form, which means you are looking at whether your company actually covers its costs for the next year’s budget . This is the working capital, a ratio that compares the current assets with the current liabilities. A 2:1 ratio would be the sign of a very financially healthy business with impeccable cash flow management.
- Earnings and Net Income Growth Your income statement is home to these two metrics which show you whether your company is actually growing. If you go back ten years you should be able to see whether your company has been in an upward trajectory year-over-year according to these metrics and measurements.
- Return on assets The success of assets is determined by comparing their returns to the money spent to get or maintain them. This indicates how profitable a company is in relation to its assets. Companies can have a relatively successful return on assets, but still be spending too much on those assets for them to be turning a profit.
- Cash flow Always keep an eye on what kind of cash you are bringing in. Where is it coming from? How are you generating it? What are the biggest streams of income?
All of these metrics and measurements are incredibly useful when seen in visualizations made possible by software like that offered by Questica. Reporting on them can be almost entirely automated, helping you and your accountants make the best use of your cash and assets, while ensuring that you are achieving smart goals for growth and investment. And with Questica’s performance solution, it will allow your company to keep track of your goals and manage objectives. Check out our website to learn more about how our software will change the way you manage your money.