Steadily increasing revenue and a growing footprint in your local market may be signs your business is financially healthy, but other factors can be just as important. However, even if you keep up with daily bookkeeping tasks, gauging the financial success of your company can be difficult if you don’t know what metrics to track. Learn more about how to evaluate your company’s strength below to help you make better decisions and set your business on a path toward sustainable growth.

Measuring Metrics

Monthly revenue is one of the most important indicators of financial strength, but only when compared to your expenses. If the cost of products, supplies, payroll, rent, and utilities consumes a significant portion of your revenue every month, your business may not have the resources to make new investments or pay for unexpected expenses.

To understand your business’ cash flow, divide your monthly revenue by your total liabilities, including debt payments, accounts payable, and operating expenses. Ideally, your income should be double your liabilities, but you can consider your business healthy as long as the ratio between revenue and costs is more than 1:1.

Improving Financial Health

Increasing revenue and cutting expenses are essential for improving the health of your business. Staying current with your bookkeeping will ensure you have the information to make these decisions, allowing you to identify your most profitable products and services, as well as ways to cut expenses.

Paying accounts payable as soon as possible is also a wise financial move, helping establish your business reputation and save on financing and interest charges. Finally, you should also create an effective system for collecting accounts receivable and maximizing your monthly revenue.

Managing your bookkeeping can be a challenge, which is why Expex in Latham, NY, developed Carly—an innovative app designed to take the stress and uncertainty out of accounting. This user-friendly app will be the last bookkeeper you’ll ever hire, as it fully integrates with QuickBooks® to automatically pay bills, manage cash flow, and bring potential problems to your attention. Visit their website to learn more about how Carly can help, or call (518) 389-2305 with any questions.