May 15, 2025 • Articles / Resources

Understanding and Monitoring Key Financial Metrics: A Path to Sustainable Business Growth

Tracking financial Key Performance Indicators (KPIs) is essential for effectively managing your business and making informed decisions. These metrics are crucial for driving sustainable growth, forecasting future performance, and preparing for financial partnerships or business exits.

While KPIs may vary by industry, here are a few fundamental financial metrics to help you begin assessing your organization’s health.

Cash Flow

Prioritizing cash flow management is vital for business owners. As outlined by Greg Crabtree, an accountant and small business advisor, in his book “Simple Numbers, Straight Talk, Big Profits!“, understanding your cash flow involves knowing when to expect customer payments and maintaining accurate financial records daily, weekly, and monthly.

Establishing the right priorities ensures a strong business foundation. Focus on the four core cash-flow forces: taxes, debt, core capital, and distributions. Crabtree suggests maintaining a core capital target equivalent to two months of operating expenses without using your Line of Credit.

Gross Margin

Instead of solely focusing on revenue, track your Gross Margin, which is calculated as net sales revenue minus the Cost of Goods Sold (COGS). This metric provides a clearer picture of your business’s profitability. For detailed examples and calculations, refer to this article from Investopedia.

Cost of Goods Sold (COGS) / Cost of Sales

As noted above, COGS is a necessary metric to understand your Gross Margin and Profitability. To better understand methods of calculating, again, Investopedia offers a detailed explanation.

Aligning Your Team

Want to take your business even further? Empower your team by sharing identified financial metrics to promote alignment, collaboration, and accountability.

Resources

For tools to help you track your business’s financial health, explore Business Profitability Resources from CRI Simple Numbers.