Key Financial Metrics

In 2020, I travelled Southeast Asia. COVID year and absolutely fabulous. China was locked down, leaving fewer tourists and creating an atmosphere most will never experience.

Before I left, I spoke to a client of mine who had just travelled Asia. I asked what to pack. “Take a door wedge, in case you stay somewhere sketchy and want to ensure nobody gets in”.

*hopped on Amazon and ordered 6 door wedges*

I packed FOUR door wedges. During my time in Asia, I didn’t use them. I also packed five pens(?!?) – my justification was that I’d have one if the aeroplane didn’t give me one when I filled out customs forms, and I guess the other four were in the emergency that the first one was broken.

I was over-prepared, and it became a hindrance – a heavy bag becomes very annoying after about a week.

How many times have you Googled financial metrics to ensure your business is performing well? You’ve probably read loads of different ones and proceeded to write them down. Some that I probably couldn’t even name.

“I’m going to track these.”

Yet, you never do. That’s not because you don’t want to, but because it’s too overwhelming. Being over-prepared results in you doing nothing, which is annoying. Inaction is the worst thing you can do with your finances.

I’m going to give you the metrics I would track if I were a financial rookie:

• What’s my monthly and annual income?
• What revenue streams are driving my income?
• What are my monthly and annual costs?
• Can I reduce any of my costs without impacting service delivery?
• What monthly and annual profits have I made?
• What should I have aside for my taxes?
• Do I have enough cash to cover my upcoming costs and liabilities?
• What can I pay myself?
• How does performance compare to other months, quarters and years?

You can pull most of these from accountancy software in minutes.

There is more you may want to know, but as a small business, I would start with those and build on them. You don’t want to be carrying door wedges that may be useful, but are unlikely to be 99% of the time. You want necessities that are always useful, like your passport (or a SIM card ejector – crucial).