To run a business, you need to keep track of certain numbers. These numbers are called key metrics, and they can make running your business successfully much easier. In this episode of MissionBusinessPodcast.com, Bernard Roesch explains why it’s important to have metrics and how to identify and use them in your business.
If you have any questions about this podcast episode, please feel free to contact us.
Why Are Metrics Important
Metrics make running your business easier by helping you figure out what is important. If you know which metrics are important in your own business, you can focus directly on those metrics. This enables you to work on the business to help it succeed rather than simply just working.
How To Identify Your Metrics
The specific metrics of success for your business will vary depending on a few factors.
- For example, if you have a heavy accounts receivable business, where you invoice clients and wait to get paid, then it’s important to track metrics related to accounts receivables.
- Tracking your accounts receivable aging could be an important indicator in your business. If your business keeps inventory, you need to balance cash versus having available inventory.
- Tracking something like, inventory turn, which is the speed in which you sell inventory you have, may be important.
All businesses should be tracking metrics such as cash flow, profit margins, and other key financial metrics. While the absolute number for these metrics will vary by business, seeing changes over time in those numbers is what can help you identify potential problems or opportunities.
How To Use Financial Metrics In Your Business
There are a few key steps you’ll need to address in order to use financial metrics in your business.
- First, you need to find the source of that data so that you have the metrics to review. This may include updating your bookkeeping processes to ensure that the data is being entered, and a reconciliation process to ensure the data is accurate.
- Once you have the data source updated, you need to produce the metrics. This is usually done as a report during your accounting process. For example, when your bookkeeper finishes bookkeeping for a certain time period, they can produce a report for that time period, and possibly even comparative previous time periods.
- The frequency of when you review your key metrics can vary depending on your business and also depending on the metric.
- Most metrics should be reviewed at least once a month, but some metrics may be reviewed more often if it’s very sensitive in your business. For example, some businesses that have tight cash flow, review cash flow reports everyday.
Do You Need Help In Identifying And Using Metrics
If you need help identifying the key metrics of success for your business and setting up a routine to use these metrics, contact Bernard today.
You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.