Monitoring financial indicators is essential for the success and sustainable growth of any company. Without this analysis, managers are left in the dark about the actual financial situation of the business, running unnecessary risks. To keep the company on track, it is crucial to monitor metrics that indicate profitability, liquidity, and operational efficiency.

If you want to have greater financial control, make strategic decisions, and avoid cash flow problems, this article is for you. We will explore the main financial indicators and how to use them in favor of your business.

What are financial indicators?

Financial indicators are metrics that help measure a company’s financial health. They provide information about profits, expenses, investments, cash flow, and debt, allowing entrepreneurs and managers to make better-informed decisions.

Regularly monitoring these indicators helps to:

• Evaluate the company’s financial performance;

• Plan investments and expansion more securely;

• Identify bottlenecks and opportunities for improvement;

• Reduce risks and avoid unpleasant surprises.

Now, let's learn about the main financial indicators that you should monitor.

The main financial indicators to track in your business

1. Net Profit

The net profit is one of the most important indicators for any company, as it represents the amount left after all expenses and taxes.

Formula:

NetProfit=TotalRevenue−(Costs+Expenses+Taxes)Net Profit = Total Revenue - (Costs + Expenses + Taxes)

Monitoring this metric helps to understand whether the company is really making money and if the operation is financially sustainable.

2. Net Profit Margin

The net profit margin measures the percentage of revenue that turns into profit after all costs and expenses.

Formula:

NetProfitMargin=(NetProfit/TotalRevenue)x100Net Profit Margin = (Net Profit / Total Revenue) x 100

This indicator is essential to understand how efficient the company is in generating profit.

3. Cash Flow

The cash flow tracks the inflows and outflows of cash over a certain period, ensuring that the company has resources to operate.

Formula:

CashFlow=Inflows−OutflowsCash Flow = Inflows - Outflows

Monitoring cash flow prevents liquidity problems and allows for more efficient financial planning.

4. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

The EBITDA is an indicator that measures the company's ability to generate financial resources before financial expenses and taxes.

Formula:

EBITDA=OperatingProfit+Depreciation+AmortizationEBITDA = Operating Profit + Depreciation + Amortization

It is a fundamental indicator to evaluate operational performance and compare companies from different sectors.

5. Liquidity Ratio

The liquidity ratio shows the company's ability to pay its obligations in the short term.

Formula:

LiquidityRatio=CurrentAssets/CurrentLiabilitiesLiquidity Ratio = Current Assets / Current Liabilities

If the result is less than 1, it means that the company may have difficulties in meeting its financial commitments.

6. Total Debt

This indicator measures how much the company relies on third-party capital.

Formula:

TotalDebt=(TotalLiabilities/TotalAssets)x100Total Debt = (Total Liabilities / Total Assets) x 100

If the value is too high, the company may be facing elevated financial risks.

7. Financial Break-even Point

The break-even point is when the company neither makes profit nor incurs losses, meaning that revenues cover all costs exactly.

Formula:

BreakEvenPoint=FixedCosts/(Revenue−VariableCosts)Break-even Point = Fixed Costs / (Revenue - Variable Costs)

With this indicator, you know how much you need to earn to keep the business running.

How to use these indicators in practice?

Now that you know the main financial indicators, here are some best practices for applying them in your daily operations:

1. Monitor regularly: Set a routine to track the numbers and compare them with previous months.

2. Use management software: Specialized systems help generate accurate reports in real-time.

3. Set financial goals: Work with financial KPIs to improve the company's performance.

4. Consult experts: Having an accountant or a financial consultancy makes a significant difference in data interpretation.

5. Anticipate problems: Use the indicators to predict financial challenges and address them before they impact.

How can Beorange help with your business's financial control?

Managing financial indicators can be a challenge for many entrepreneurs. To make this process simpler and more efficient, Beorange offers a complete platform for financial and accounting management.

With our solution, you will have:

• Automation in financial control, reducing errors and rework;

• Complete financial reports, facilitating decision-making;

• Real-time monitoring of cash flow and other indicators;

• Specialized support, ensuring compliance with tax regulations;

• Security and convenience, with secure storage of accounting documents and data.

If you want more financial control, cost reduction, and efficient planning, rely on Beorange. Get in touch and find out how we can help your company grow!