Small business owners can be so buried in the day-to-day that they lose sight of where their business stands. That’s where tracking KPIs comes in.
Key Performance Indicators (KPIs) can keep you on track and let you know whether your efforts are paying off. KPIs will also help you determine if you’re spending too much time on something that’s not worth it and prioritize your tasks accordingly.
Here are five financial Key Performance Indicators you should be tracking:
1. Profit & Loss (P&L)
Profit and loss reports are a simple and effective barometer of success. They give you a record of your business income and expenditures over a specific period and either show a profit (income exceeding expenses) or a loss (where expenses exceed income).
(Go to Reports > Profit & Loss Report)
2. Outstanding Revenue
Are you doing a good job of billing and collecting? This has a huge impact on cash flow and the ability to pay your bills.
If you’re not keeping proper records, months could go by before you realize you have outstanding invoices.
(Go to Reports > Outstanding Receivable)
3. Income by Customer
When you start out, you’re likely to be grateful for customers of any kind. But successful businesses are generally those that identify their most valuable customers, nurture relationships with them and work to bring in new customers with a similar profile.
(Go to Reports > Best Customer Report)
4. Sales Tax
Keeping tabs on the sales tax you’re collecting from customers and paying to the government is a necessary part of managing your business.
The worst thing you can do is collect tax and combine it with income.
(Go to Reports > GSTR1 (For Indian Users) and Tax Register report for (Outside India))
5. Revenue by Item/Service
Many small service-based businesses provide a range of offerings. You may run a small agency that does everything from video campaigns to content strategies.
But where does most of your actual revenue come from? Understanding this will help inform how you market, grow and staff your business. If most of your customers are purchasing Samsung TV, it is worth to buy more Samsung TVs compared to other brands.
(Go to Reports > Inventory Item Details Report & Check Profit)
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Happy Book Keeping!