Some Key Financial Indicators

If you are attempting to manage a business you must have timely and meaningful financial indicators. Many companies do this with some sort of financial dashboard, but whatever your method, here are a few things to be on top of.

Some Balance Sheet Data

Keep up with some key balance sheet data. This should be done at a minimum monthly, but preferably weekly or even daily, depending on the particular piece of information. Here are some of the key financial indicators to track:

  • Cash balance. This is one of those things you should know every day
  • Accounts receivable balance and aging by customer. Stay on top of this to make sure you are converting this to cash in a timely manner and to know which customers are potential problems. See 80/20 Rule for Receivables Management for help on this
  • If you sell products, know your inventory level, the mix of products and turnover of inventory by item. This will help you know if you will be able to meet demand or if you are overstocked and need to take action to address the overstock
  • Accounts payable balance and aging by vendor. One of the last things you want to have happen is to be cut off by a key vendor. View this in light of your cash balance and anticipated accounts receivable collections to be certain you can meet your obligations to vendors
  • Accrued expenses and current portion of debt. Will you have the funds to pay these obligations as they are due? Again, view this in light of your cash balance and anticipated accounts receivable collections


Some key financial indicators for sales include:

  • Sales pipeline. What is the status of potential sales? How far along the pipeline are sales leads?
  • Orders on hand. You must know this to be sure you have the resources to meet these obligations
  • Order backlog. Here I am referring primarily to orders which you cannot immediately fulfill. How long before you can fulfil? Is there an alternative acceptable to the customer if you cannot meet the original order?

Income Statement

For the Income Statement:

  • Keep track of how sales and expenses are growing, both from a gross amount aspect and in relationship to each other.
  • How do current line items on an income statement compare to prior periods or budget? See 5 Tips About the Income Statement for more on the income statement
  • Are gross margin percentage increasing, decreasing, or staying the same and why?

Payroll and Headcount

Key financial indicators for payroll and headcount include:

  • Track your payroll expenses and be alert to trends either up or down
  • Keep a running tally on headcount by department and roles within departments
  • Track sales per employee. This is somewhat of a measure of the efficiency of your business. As more of business has become automated this is a number that can trend dramatically upward. For example, many e-commerce businesses can do several million in sales with just a few employees, particularly if they have another company doing fulfillment for them

Obviously not everything that needs to be tracked can be covered in a relatively short posting. Additionally, this will vary by industry and individual business. Also, some managers have particular information they like to track. The key point is, “Are you tracking the things you should and how are you using this information?”

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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