5 Key Metrics Every Business Owner Should Track
Why Metrics Matter
As the new financial year begins, many business owners focus on growth; more sales, more staff, more opportunities. But without visibility of the right numbers, growth can be misleading. You might see revenue increase while profits slip, or spend heavily on marketing without a return.
At Inspired Accounting, we’ve seen how the right key performance indicators (KPIs) give business owners clarity and confidence. Tracking these five metrics can help you make better decisions, avoid surprises, and build long-term value.
1. Profitability Margins
To reveal your business health
Revenue is important, but profit is what sustains growth. Profitability margins show what percentage of sales actually turns into profit.
Example: If your business earns $1 million in sales but only keeps $50,000 as profit, your net profit margin is 5%.
Tip: Compare your margins to others in your industry and review quarterly to check they’re improving.
2. Cash Flow Forecast
To prevent shortfalls
Even profitable businesses can fail if the timing of money in and out doesn’t line up. A cash flow forecast shows whether you’ll have enough to pay staff, suppliers, and the ATO on time.
Build a rolling 12-month cash flow forecast using Excel or within your accounting software. Update it monthly with actuals versus projections.
Example: You might have $200,000 worth of invoices due, but if customers pay late, you could struggle to cover wages this month.
Tip: Update your forecast monthly and run “what if” scenarios, such as late payments or higher costs.
3. Debtor Days
To track customer payments
Debtor days measure how long it takes for customers to pay their invoices. Profit on paper is meaningless if the cash isn’t in your bank account.
Calculate debtor days by dividing trade debtors (unpaid invoices) by total sales and multiplying by 365. Many accounting systems provide this as a built-in KPI report.
Example: If your terms are 30 days but clients regularly pay in 60, your business is effectively funding their operations.
Tip: Use automated reminders, offer small discounts for early payment, and review your credit terms regularly.
4. Revenue per Employee
To measure team efficiency
This metric shows how much revenue each team member generates. It highlights whether your people, systems, and processes are running effectively.
Divide total revenue by the number of full-time equivalent employees. If you use workforce planning software, this data can be linked directly.
Revenue per Employee = Total Revenue ÷ Number of Full-Time Equivalent Employees (FTEs)
Example: If revenue per employee drops after you hire, it may mean staff need more training or that processes need tightening.
Tip: Use this measure to guide hiring decisions and spot areas where technology could boost efficiency.
5. Gross Profit Margins
To check product and service pricing
Gross margin is your profit after direct costs like materials or subcontractors. It shows whether your pricing is right or if costs are eating into profits.
To calculate your gross profit margin, take your total revenue for the period, then subtract direct costs that can be tied specifically to delivering the product or service. For example, contractors you engaged for the project or raw materials you purchased. Do not include fixed overhead costs such as rent, utilities, or admin salaries.
Gross margin is (Sales – Direct Costs) ÷ Sales × 100. Review per product or service line if possible.
Example: If it costs $60 to deliver a service you charge $100 for, your gross margin is 40%.
Tip: Review margins quarterly, renegotiate supplier contracts, and adjust pricing when necessary.
The Big Picture
When you track these five metrics, you’re not just looking at numbers. You’re protecting your business from surprises, making smarter decisions, and building value for the long term.
At Inspired Accounting, we help business owners:
Identify the right KPIs for their industry
Build dashboards that make numbers easy to understand
Interpret results so you can take action with confidence
Contact Inspired Accounting today to start tracking what matters most and take control of your business performance in 2025.
Important Note:
The information provided in this article is general in nature and does not constitute financial or tax advice. This information has not been prepared taking into account your specific objectives, financial situation or needs. Before acting on any information in this article, you should consider its appropriateness to your circumstances and consult with a registered tax agent or financial advisor.
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Inspired Accounting helps ambitious businesses achieve their growth goals through proactive accounting strategies and clear, actionable advice.
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