Whether you are a startup or a business with experience, monitoring progress and performance of your business is crucial for success. Knowing where to start and how to keep accurate financial records is easier said than done for a lot of small businesses.
At The Quantify Group, our outsourced bookkeeping services make sure you have the right financial data and reporting to keep your business track. Our team of accountants and bookkeepers for startups can develop a system to create accurate and timely financial reports, helping you grow the business by delivering the financial data you need. You will have more time to focus on growing your business and spend less time preparing financial statements.
Here are some of the key performance indicators you should monitor and the impact they can have on your bottom line.
Burn Rate
Burn rate refers to how quickly a new business spends money in comparison to its revenue. It is essential for investors to know the financial health of a company. If a company spends more than it earns, it has a high burn rate, which is not ideal. It might run out of funds before becoming profitable.
If a company is spending its money slowly, it has a low burn rate, which is good. This means that the company is likely to become profitable in the future. It is really important for new businesses to keep an eye on how much money they are spending and to try to control their expenses, increase their revenue, and become profitable as soon as possible.
Cash Runway
Cash runway is a crucial metric for any startup. It refers to the length of time, in months, that a company can sustain its operations with the existing cash reserves, given a steady state of income and expenses. In other words, it tells you how long your startup can survive before it runs out of cash. This metric is important as it helps in strategic planning, such as determining when to start new funding rounds.
When you have a good understanding of your cash runway, startups can make informed financial decisions, and investors can determine whether or not a startup is a smart investment. That’s why startups need to monitor their cash runway and take proactive measures to increase it if necessary.
Gross Profit Margin
You can calculate your gross profit margin by subtracting the cost of goods sold (COGS) from your total revenue. The resulting figure represents your gross profit margin, which is an important financial metric for any business.
You’ll always want to have a higher gross profit margin because it means that you have more funds available to cover your expenses and potential profits. The higher the gross profit margin, the more revenue you generate from your sales compared to the cost of producing or selling those goods.
Net Profit Margin
Net profit margin is a financial metric that companies use to measure profitability. It takes into consideration not only the cost of goods sold (COGS) but also all other business expenses such as operational costs, taxes, and interest. In other words, the net profit margin is the difference between a company’s total income and all of its expenses.
This is a very important measure that can tell us how much money a business is actually making after it has paid for everything it needs to. A high net profit margin usually means that the business is doing well because it is spending its money wisely and making more money than it is spending. On the other hand, a low net profit margin could mean that the business is having a hard time controlling its costs and needs to make some changes in order to make more money.
Revenue Growth Rate
A business’s revenue growth rate is an essential key performance indicator (KPI) that gives you an idea of the rate at which a business’s income is growing. It is an important metric for measuring the financial health and progress of a company.
For any startup business or small business, it’s important to keep track of how much money they’re making and how quickly they’re making it. This can tell them a lot about how well they’re doing and help them stay focused on their goals for growing the business.
Accounts Receivable Aging Report
An accounts receivable report is a document that tells a company how much money their customers owe them for their products or services. This report is important because it helps businesses keep track of their money and make sure they are receiving payments on time. The report usually includes details like the name of the customer, the date of the invoice, how much money they owe, and when the payment is due.
By looking at this information, businesses can figure out if they need to improve how they collect payments from their clients. The report also helps businesses plan for the future and make sure they have enough money to pay their bills (otherwise known as accounts payable) on time.
How The Quantify Group can help
If you’re struggling to keep up with your business’s financial metrics or need help getting a system in place, we can help. Our bookkeeping services for startups make sure you have accurate and up-to-date financial reports from your accounting software.
With our transparent monthly packages and expert startup bookkeepers, you can rest assured that our team is here to partner with you every step of the way. From recording financial transactions to generating monthly reports, our team has the best bookkeepers ready to help with your bookkeeping and accounting needs.
From bookkeeping services for dentists to communication companies, contact our team today to learn more about our services.
