Setting up the right business strategy is crucial to running (and growing) your business. To craft the right Financial KPI Reporting Services for your business, you need to figure out what key performance indicators (KPIs) you should use specifically for your finances.
Financial KPIs can tell you a lot about your business. Let's say you are just getting started and launching your first strategic initiative. You'll need to know how those measures affect your bottom line. Financial KPI Reporting Services will also prove beneficial if you plan to grow and scale. Analyzing the numbers can help you determine if you should keep things on the course or if you need to revamp your approach.
What is the best way to use financial KPIs to enhance your business strategy? How can financial KPIs be effectively used to guide strategic decisions? Let us find out the answer to these two important questions.
5 Useful Financial KPIs for Business Strategy
You should continually track and use a few key financial performance indicators to inform your strategy. These are the most important metrics that help your business:
- Sales Growth Rate
A business’s success depends on sales growth. Having the right virtual bookkeeper by your side, who can monitor each aspect of the sales growth, you can figure out what parts of your business strategy are working and which aren't.
- Revenue Concentration
The activities that drive the most revenue are often the best use of your time, energy, and resources. Therefore, revenue concentration is another important financial KPI. Your business's revenue concentration shows you how much your clients and projects bring in as a percentage of your total revenue.
- The margin of net profit
Your business has to make money to be successful. One of the best ways to measure a company's health is profitability. Although different profitability ratios can be helpful - such as operating profit margin and gross profit margin - net profit margin should always be the key indicator.
- Accounts Receivable Turnover
Paying your invoices late (or not paying them at all) can lead to serious financial ramifications for your business. Thus, it is important to track the accounts receivable turnover (the debtor ratio). This indicator determines your client's ability to pay their invoices on time.
- Working Capital
Cash is the lifeblood of any business. Cash is what keeps your day-to-day operation going. It's called working capital. Having a virtual bookkeeper, who has a good understanding of your working capital ratio, will help you plan for the future, like bringing on more team members or investing in new tools. Furthermore, it will help you determine when to raise funds to keep your business moving.
The Verdict: Use Financial KPIs to Drive Your Business Strategy
The above information should help you understand which financial metrics to track for your business's long-term health, their calculation method, and what they indicate about your current strategy. These financial key performance indicators can help you determine how to work toward achieving business objectives.
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