Financial indicators every entrepreneur should track

Accounting is not just an obligation to the state, but a source of information about the health of your company. Key financial indicators show you in figures whether you are making money, whether you have enough cash and whether you are growing sustainably. You do not need to know dozens of formulas; it is enough to understand a few that carry the most weight for decision-making. The aim is not to drown in formulas, but to get a simple, regular picture of how the company is performing and where it is heading.

Why track indicators

Without regular measurement, you are running your business blind. Indicators work like a dashboard: they warn you early that something is getting worse, while there is still time to react. More important than a one-off value is the trend over time and the comparison with your own plans.

Profitability

The first group tells you whether your business is making money at all. Track how much of every euro of sales you keep after deducting the cost of the goods and services sold, and how much after taking all costs into account. If the margin is falling, it is usually a sign of rising input costs or pressure on prices.

Liquidity and cash

Profitability and cash are not the same thing. A company can be profitable on paper, but if its customers pay late, it can run into trouble paying its own liabilities. So keep track of the ratio of current assets to current liabilities and, above all, of the actual movement of money.

• Monitor your cash balance and how it develops week by week.
• Measure the average collection period of your receivables.
• Compare how quickly you pay and how quickly you are paid.

Debt

Borrowed funds are not the enemy; they help you grow. The problem arises when there are too many of them relative to equity, or when the repayments exceed the company’s ability to carry them. Track the ratio of borrowed funds to equity and what share of your profit is eaten up by debt servicing.

Activity and efficiency

This group shows how well you use your assets. It includes inventory turnover and the collection period for receivables. If your capital sits for a long time in the warehouse or in unpaid invoices, it holds back growth, even if the company is profitable.

Comparison and context

A figure on its own, without comparison, does not say much. So assess indicators on three levels. Over time, that is, how the value develops from month to month and from year to year. Against the plan, so that you can see whether what you expected is materialising. And, where possible, against the norms in your sector, since a healthy level of debt or margin looks different in trade than in manufacturing. Only this comparison gives the indicators their meaning. At the same time, avoid tracking too many figures at once. It is better to track a few truly important indicators consistently than dozens superficially, which in the end will only overwhelm you.

How to work with indicators

Do not focus on a single figure. Only a set of indicators assessed together and over time makes sense. Choose a few key ones that you will track monthly, and add a short comment on why the value has changed. An accountant will help you choose the ones most relevant to your sector and prepare an overview you can find your way around quickly.

Related articles: Receivables management: how to avoid non-payers, How to put together a business plan that works, Trade credit insurance: protection against non-payment.

Frequently asked questions

Which indicators are most important for a small company?

For smaller companies, the most useful tend to be cash and how it develops, the margin and the collection period for receivables. These three areas reveal most quickly whether the business stands on healthy foundations, even without complex financial analyses.

How often should I track the indicators?

Ideally, track the key cash-related indicators monthly, and even more often if cash flow is tight. More comprehensive analyses of profitability and debt only need to be carried out quarterly, together with your accountant.