No matter your industry, knowing your numbers is essential. The phrase “what doesn’t get measured, doesn’t get managed” applies to every business that wants to grow and improve its profitability. But with countless financial metrics available, how do you determine which ones truly matter to your business? And once identified, how do you set, track and use them effectively?
Why financial metrics matter
Financial metrics are more than numbers on a spreadsheet; they are strategic tools that guide business decisions. They provide insight into performance, uncover opportunities for improvement, and enable you to stay focused on your long-term goals.
Used correctly, the right metrics will help you to monitor financial health, improve efficiency, allocate resources effectively and drive informed strategic decisions.
Some key financial metrics to consider
- Turnover (revenue)
Your top-line income. When analysed alongside profit and cost metrics, it offers context for business growth and market demand. - Gross Profit Margin:
This metric measures how efficiently your business turns resources into revenue. It indicates how much of each pound earned is left after covering the cost of goods or services sold (COGS). A strong gross profit margin shows sales success and operational efficiency - Cash Flow:
This is the lifeblood of any business. Monitoring cash flow ensures you have enough liquidity to cover day-to-day operations and future investments. Regularly forecasting your cash flow helps anticipate any shortfalls - Sales pipeline
A forward-looking metric that helps forecast income and plan resource allocation. A strong pipeline indicates future stability. - Productivity and utilisation
Measures how efficiently your team is operating. Especially important in service-based businesses, these metrics highlight capacity and profitability. - Work in progress (WIP)
Helps you manage unbilled or ongoing projects. Monitoring WIP ensures smoother cash flow and better project visibility.
Setting the right metrics
Every business is different. The best financial metrics for you depend on your industry, structure, and strategic aims. When selecting metrics, consider what your business goals. What are your biggest financial risks or challenges? Are your metrics helping you predict and respond to change?
It’s often helpful to work with an accountant who can tailor a financial reporting framework to your specific needs – and you can learn more about this on our strategic business advisory service page.
How to track your metrics
Cloud-based accounting packages, such as Xero, QuickBooks or Sage, make metric tracking simple and efficient. Many offer dashboards, alerts and integrations with tools like Customer Relationship Management (CRM) and project management software.
When selecting a cloud-based accountancy system, look out for features such as real-time financial dashboards, customisable KPI tracking, automated reporting and integration with business operations tools
Common KPI’s across sectors
While the best KPI’s will depend on your unique situation, here are some widely used financial metrics, including:
- Gross and net profit margins
- Revenue growth rate
- Average transaction value
- Customer acquisition cost (CAC)
- Customer lifetime value (CLTV)
- Debtor days/cash conversion cycle
- Operational efficiency ratios
Expert insight: Add value with financial clarity
The true value of setting the right metrics lies in the clarity they bring. They help you understand not just what is happening, but why, and what you can do about it. With guidance from a knowledgeable accountant and the right tools in place, you can gain a sharper financial focus and make smarter, faster decisions.
Could we help your business set and track the right financial metrics?
At Hayward Wright, we support businesses of all sizes and in lots of different sectors, providing them with strategic advice on how to set and track the right financial metrics. Whether you’re just getting started or scaling fast, we can help you build the right financial framework for long-term success.
Looking to get more from your numbers? Speak to our expert team today.