Running a business without tracking financial KPIs is like driving without a dashboard. Here are five KPIs every business owner should review monthly:
1. Gross Profit Margin
Formula: (Gross Profit ÷ Revenue) × 100. This tells you how much of every shilling earned remains after direct costs. A healthy margin varies by industry but should be stable or growing month-on-month.
2. Net Profit Margin
Formula: (Net Profit ÷ Revenue) × 100. After all expenses including overheads, taxes, and financing costs, how much profit does your business actually make?
3. Current Ratio
Formula: Current Assets ÷ Current Liabilities. A ratio above 1.5 indicates your business can comfortably meet short-term obligations. Below 1.0 is a warning sign.
4. Debtor Days (DSO)
Formula: (Debtors ÷ Revenue) × Days in Period. How long does it take your customers to pay you? The lower this number, the better your cash flow.
5. Operating Expense Ratio
Formula: (Operating Expenses ÷ Revenue) × 100. If this ratio is rising over time, your overheads are growing faster than your revenue — a serious warning sign.
Avatechtax produces monthly management accounts that include all five KPIs in a clear, easy-to-read format tailored for non-accountants.
