Delve into the secrets of accounting service success as we unveil the key metrics that drive business excellence. Elevate your accounting game with the insights needed to propel your business to new heights.
Why Bother with Accounting Service and Metric?
Understanding these accounting metrics will help with business decision-making, as these metrics can be as beneficial to your business as other metrics, such as business metrics, sales metrics, financial metrics, and more.
To be useful, you must recognize how these Accounting Services can benefit your business.
Specific businesses have specific needs. However, some of these may be applied across the board. Remember that you do not need to buy expensive accounting software or powerful invoice apps to monitor these metrics, as every business owner should do.
These metrics are performance since they contribute to a company’s overall revenue and net profit performance.
Accounting Services and Metrics You Should Monitor
1) Operating Cash Flow (OCF)
The most basic and the most important. Keep a close eye on this metric.
This goes beyond profit. It simply captures the two-way movement of money through your business account… in and out.
When your OCF is placed side-by-side with the gross capital invested, a true image of the actual state of things becomes clear.
Here is why we should monitor cash flow.
- We need an “at-a-glance” view of money flow in and out of business.
- This helps to monitor growth or otherwise.
- It helps to establish a healthy pattern of spending.
2) Working Capital
This refers to your cash on hand. The working capital is accessible, liquid, and available when needed.
To arrive at your working capital, consider short-term debts, running costs, and any loans to sustain your business.
3) Accounts Payable
The sum of outstanding bills owed by the business and your short-term debts in figures. This is not an asset but a liability.
Why you should monitor this:
- If you lose track of this, you won’t keep up with your debts.
- You may be able to stall a few payments to buy more time.
- Helps you catch the ideal times to get a reasonable discount.
4) Accounts Receivable
This is the money your customers owe you. Try encouraging your customers to pay early or on time to keep this low.
Goods and services bought on credit would also be included in accounts receivable.
5) Direct Cost
This is a natural part of Accounting Service because it is specific to one product or service that you have rendered.
This should be calculated to cover both the material cost and artistry. The direct costs should be kept low.
Why should you monitor this?
- Gives you an idea of when to switch material suppliers.
- Helps to calculate the operating margin.
6) The Operating Margin
This shows how good a company is at generating income from running its day-to-day activities. You get this number after subtracting the cost of product development, advertising, and other business costs.
7) Cash Burn Rate
This is the rate at which a business eats into its cash reserves or balance.
Technically, this is how much of your cash stores you’ve used.
Why should you monitor this?
- Helps you figure out where the major costs come from.
- Helps you cut down on unnecessary spending.
8) Net Promoter Score (NPS)
A measure of customer satisfaction. This metric recognizes that the customer is king. The NPS is calculated using different levels of positive reviews from customer surveys. This might also involve engagement metrics or social media metrics from social media activity. This is a key performance indicator to see if the customer’s lifetime value standards are met.
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