7 Key Finance Metrics Business Often Overlook

In this article, we'll analyze commonly overlooked metrics that can help business leaders more effectively measure revenue and productivity.

Tracking metrics allows you to boost overall outcomes and align your employees and operations with company objectives. It offers an actionable method to achieve business goals and strategies. Metrics indicate the extent to which an organization has accomplished its objectives within the planned time frame.

Metrics are specifically important for software development firms, as they are an essential component for cost estimations, performance, debugging, management, and quality assurance. Managers can utilize metrics to pinpoint, prioritize, communicate, and track any concerns to enhance team productivity.

le) Metrics

several uncommon but useful metrics that could boost your firm’s bottom line.

1. Interest Expense

This represents the funds borrowed by the company. It is mentioned in your income statement as interest that needs to be paid on borrowed money. Your organization’s interest expense is obtained by calculating the interest rate on your outstanding debt amount. It is higher at times when there is a rise in inflation, as the business debt carries a greater interest rate. Similarly, flat inflation reduces interest expense. This metric directly impacts business profitability, as it can take away or free up funds.

If your company’s debt load goes up, your profitability can take a hit, and you’ll be hard-pressed to pay your interest expenses during economic slowdowns.

2. DSO (Days Sales Outstanding)

ny sales. It is obtained by dividing the accounts receivable by the total sales value during the period, and by multiplying the outcome with the number of days in that period.

DSO ratio = accounts receivable / (annual sales / 365 days)

Low DSO figures enable a company to more quickly collect money and use the cash for business growth. Organizations that use credit facilities have high DSOs, as they need longer processing time. A rise in DSO can cause cash flow issues and could lead to a decision to boost the creditor firm's bad debt reserve.

3. Control Chart

Control chart is a metric used in software development that indicates a task's duration from beginning to end. It's also called lead time or the development time of each job. Product owners and scrum masters utilize this metric to control their development process's efficiency.

r team's previous performance and gauge the impact of a process alteration on the team's productivity. The metric also enables stakeholders to view the team's performance and helps Kanban managers to set team targets based on past performance.

4. Gross Profit and Revenue per Employee

This ratio is calculated by dividing the organization’s revenue by the number of staff members. It is utilized to track resource use and productivity. Higher revenue for each employee indicates effective resource use and greater productivity.

Companies can improve their gross profit and revenue per employee by learning to focus on their strong points. This enhances staff productivity and leads to an increase in revenue per employee.

5. CAC (Customer Acquisition Cost)

It is the cost of getting a new consumer. This metric is calculated by dividing the funds spent to get new customers by the number of consumers obtained in the evaluation period. It helps you decide the budget amount you can spend on acquiring new consumers and still be profitable.

Typically, startups have higher CAC as they need to invest in developing their brand visibility in new markets. Mature enterprises may also see a rise in CAC when they move to a new region or introduce a new product or service.

Your company can enhance its CAC by improving on-site conversion metrics, boosting user value, and deploying CRM (customer relationship management) processes.

6. Overdue and Met Milestones

Each business has milestones and goals, such as launching a new product or doubling its sales in the coming quarter. You can divide these big goals into smaller milestones to track their progress. By checking the overdue and met milestones, you can measure the capacity of your team. If you continuously fail to attain the milestones, you may need to recruit more people or set more realistic targets.

7. NPS (Net Promoter Score)

NPS reflects customer satisfaction levels and your product’s quality. It indicates how many users will recommend your service or product to others. An NPS score of 9-10 shows promoters who will act as your brand ambassadors. A 7-8 score reveals satisfied but neutral consumers who’ll leave you for better offers. A 0-6 score indicates disappointed users who might harm your brand image by spreading negative reviews. NPS is calculated by subtracting the detractors’ percentage from the promoters’ percentage.

The best way for a company to improve its NPS is by learning about the problems of its customers and providing fast and effective solutions to them.

Don't Overwhelm Yourself

It’s essential to track only a few but vital metrics and Key Performance Indicators (KPIs) so that you are focused on the most important aspects for your business's improvement and profitability. You should ideally try to focus on metrics that improve performance, facilitate personal growth, influence and support business goals, and bolster staff morale.

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