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Financial management

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What to look for and what to measure in order to ensure the financial health of your business

You do not need to be a qualified accountant before you can equip yourself with the basic financial intelligence that is essential to every business owner. Consider how important it could be to you to know what your Key Financial Indicators are and how often you should be monitoring them:

  • The following can be symptoms of (financial) failure within a business

  1. No budgets
  2. Over borrowing
  3. Inadequate financial reporting
  4. Poor debtors control
  5. Overly high levels of inventory
  6. Under-qualified accounting staff
  7. Unrealistic revenue forecasts
  8. Non-performing assets
  • Keep a regular check on the following ten key financial ratios in your business

  1. Sales revenue or revenue change
  2. Gross profit ratio
  3. Net profit ratio
  4. Current ratio
  5. Gearing
  6. Stock turnover
  7. Debtors’ days owing
  8. Return on equity
  9. Return on investment
  10. Net profit (after tax) per employee

  • Sit down with your Accountant and your other trusted business advisors and decide on which of the above criteria are most critical to your business and which other ratios or industry specific Key Performance Indicators will assist you to run your business at peak efficiency, then monitor them religiously.
  • Remember, knowledge is power, take control and be on top of the financial issues affecting your business at all times

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