When you want to ensure your company’s financial health, you need to start tracking key performance indicators (KPIs) that give you the insights to decide on the right strategy that can deliver the results you need for your business.
There are different types of KPIs for any business or industry, which helps give decision-makers a clear focus and guide so they can act on strategic plans that help improve their operations and overall performance.
KPIs help organizations stay on track so they can progress towards a desired goal or result. They also give key stakeholders a basis to make their decisions on so everyone will be on board in focusing their attention on the core areas that matter.
Tracking your financial performance is essential to long-term success. Here are six KPIs that can help organizations measure their current financial health.
Annual Growth Rate
Annual growth rate (AGR) refers to the average increase in the value of your investment, portfolio, asset, or cash stream in a year. This KPI shows your average return for one year and helps provide a clear picture of any financial changes within your organization.
It is calculated by taking MRR and adding on MRR from new customers for the month then adding MRR changes. Tracking AGR helps companies see the bigger picture, but 2 out of 5 SaaS companies incorrectly calculate ARR according to a report.
Annual growth rate should be tracked every month to keep up with any accounts added or deducted monthly. AGR also helps identify long-term trends and gives investors a better idea about what direction a company is taking.
A lot of the core KPIs and benchmarks are based on the annual growth rate, so every organization needs to track this properly. An FP&A software like Performance Canvas has KPI tracking capabilities that help make this easier for companies.
Churn rate can be referred to as the rate at which customers stop doing business with a company or organization. It can also be referred to as customer churn or the rate of attrition.
Organizations that are looking to expand their business should have a growth rate that exceeds their churn rate. Knowing your churn rate gives companies a better understanding of different business aspects. Any churn provides an idea of whether or not a particular segment in your business is providing value or not.
If you’re a SaaS business looking to build on your existing clientele and acquire new customers, knowing your churn rate is crucial.
Customer Acquisition Cost (CAC)
Customer acquisition cost tracks the amount of cash used to acquire new customers. It is also indicative of how long it will take a business or company to recover this amount. This KPI is often used to give companies a better idea of what they can afford to amplify their sales or marketing spend and whether they should be dialing it down.
Monthly Recurring Revenue (MRR)
Many companies make the mistake of losing sight of their monthly revenue flow as they prioritize revenue numbers. But tracking your monthly recurring revenue (MRR) is an important KPI that helps companies track any new sales, renewals, upsells, and churn every month so they can see the trend by which their business is growing.
Although it is essential to track your long-term sales, keeping a close eye on your monthly cash flow will give you a better idea of whether any efforts you’ve undertaken to scale your business are valid or not.
Every business requires an excellent working capital and investment to deliver a stellar product or service. And you cannot do any of that without any significant cash flow to pay for your daily expenses, taxes, employee salary, operational costs, and other critical resources and materials. This makes cash one of the most critical KPIs for finance.
Positive cash flow is an indicator that your liquid assets are increasing, giving you the flexibility to reinvest, settle debts, return money to shareholders, or set some aside for savings and other future investments.
Being mindful of your cash flow is important to ensure you have the funds you need to keep your business running.
Cash Burn Rate
With a changing business climate, tracking your cash burn rate is crucial. Cash burn rate follows how much capital your organization goes through every month. This can vary depending on where your business is located. Businesses that reside in a high-cost area can burn through twice more cash than others.
Organizations aiming for growth need to keep a close watch on their cash burn rate because being too focused on growth can lead to negative cash flow fast. The key to growth is first making sure your business lasts long enough for decades to come. Unfortunately, you can’t do that when you spend too much too soon.
Performance Canvas: Helping You Track the KPIs that Matter
While these financial KPIs can give you a better idea of where you are in achieving your business goals, every organization is different. Others may require other KPIs that are specific to their goals and needs, especially for businesses that are starting to scale.
When you need to manage your metrics for your growing business or organization, Performance Canvas Financials gives you a smart dashboard to track your KPIs. The Performance Canvas dashboard offers you a smart, organized, and logical way to track and present your KPIs.
If you’re a growing business looking for a comprehensive but easy-to-use KPI tracking software, find out more about Performance Canvas Financials today.