The person responsible for the accounting area of your organization is the person who has the financial pulse of the business, and that is why it is important that they use accounting indicators that help them maintain financial health in good condition.
If you are in the accounting area, surely on more than one occasion you have been asked for data about the company’s historical trends, its current state and the financial future that lies ahead.
If you promote accounting automation in your company, you will take a big step towards growth and innovation, and you will no longer make decisions blindly, nor will you have to search from one place to another for the information you need.
I invite you to continue reading so that you know what accounting indicators you should measure.
What is an accounting indicator?
Accounting indicators are data used to measure the performance of a company.
They are very useful management tools for managers, as they allow them to assess health, determine their costs and margins, identify difficulties before it is too late and reduce the risk of non-payment.
Examples of accounting indicators
Every business owner needs to move efficiently to achieve business growth. Defining KPIs is vital for your organization, as is using a dashboard to track metrics in real time and take care of your business resources.
One reason many businesses fail is because owners go with their instincts to make decisions. But when you connect data to your decision making, things change.
Here are some examples of accounting indicators you can track:
Sales by product
Make sure your products are profitable by monitoring each of your sales metrics. Look at your list and compare your best-selling products.
Profits and expenses
Measure your expenses and profits. Keeping these accounting indicators in mind on an expense control board will help you make timely decisions. Choose the time period you want to observe and compare it with other periods.
Make sure the financial health of your business is adequate. With a simple, real-time report of your financial metrics you will be able to observe the period of time you need to evaluate.
Cash flow is another accounting indicator that can make or break a company.
Use a simple dashboard to see which clients are up to date (in green) and which are expired (in red).
Best clients (by revenue)
Get a constant flow of clients by monitoring your main clients. You can start with an analysis of clients who bring more income to your company in the period of time you decide.
Expenses by supplier
Control your suppliers’ expenses continuously. Analyze the expenses of individual suppliers and see the total sum of these expenses.
Evaluating late payment commitments to suppliers or employees is another accounting indicator that allows you to anticipate the necessary financing, payment reminders to be made, deadlines to negotiate, etc.
Difference in sales
Periodically comparing your actual sales results with those initially planned, for example for a quarter, allows you to adapt your strategy in real time and control your profits.
Working capital need
Working capital is the total amount of money your company needs to finance its operations, specifically the time between cash outflows and cash inflows (the company’s operating cycle).
Company breakeven point
The break-even point is an accounting indicator that allows you to know how much is the minimum that your company must invoice to cover all its expenses and reach its break-even point.
Importance of measuring accounting indicators
The sustainability and development of a business depend on the generation of profits. However, only accounting indicators will help us know if the achieved business volume covers all expenses.
Although the basic principle seems simple, finding a profitable business is very difficult. Good management is necessary for success, and this also requires good accounting management within the company.
The role of accounting indicators is very important, because they allow us to know where we are and help determine where we need to go.
It helps to know which activity or action is more or less profitable, whether to continue, stop or adapt things.
Accounting and financial indicators provide figures that give clarity about the activity and performance of the business.
Here are some other reasons why monitoring accounting metrics is important for your business:
- Better company management . Accounting information provides reliable figures and indicators about the company’s financial situation, which constitutes a true basis for decision making.
- Decision making in real time. Real-time accounting through a dashboard makes it easy to create budgets and monitor cash flow in order to overcome potential difficulties in time.
- Good planning for the future . Maintaining and updating accounts regularly allows for better planning for the future. For example, accounting indicators help you have better budget control and monitor what is allocated to investments, in order to guarantee the competitiveness and viability of the company in the market.