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The KPIs Every Business Should Track

Revenue and bank balance are the two numbers every owner watches, and neither one predicts anything. The indicators that actually forecast the business's future sit one layer deeper.

Gross margin — the honesty metric

Revenue minus direct costs, as a percentage. It tells you whether the core exchange of your business — what you sell versus what it costs to deliver — is healthy. Track it by product line or service type, not just in aggregate; blended margins hide the losers that averages protect.

The cash conversion cycle

How many days pass between paying for inputs and collecting from customers. Every day in that gap is capital you must finance. Shortening it — faster invoicing, tighter terms, better inventory discipline — releases cash without selling anything more.

Receivables aging

Not the total owed, but its age profile. Collection probability decays sharply as invoices age; the aging report is where bad debt announces itself months in advance. Review it monthly and act at the first bracket, not the last.

Revenue is vanity, margin is sanity, cash is reality — and the aging report is prophecy.

Operating cash flow versus profit

Profit is an opinion shaped by accounting choices; cash flow is a fact. When the two diverge for consecutive months — profitable on paper, shrinking in the bank — the divergence is the single most important thing happening in the business, and it has a findable cause.

Customer concentration

The share of revenue held by your largest customer and top five. Past certain thresholds, concentration silently reprices everything: your borrowing terms, your business's sale value, your negotiating position with that very customer.

Runway and the rolling forecast

Months of operation your cash covers at current burn, refreshed against a rolling 13-week forecast. This is the instrument that converts every other metric into decisions made in time.

Cadence over quantity

Five indicators reviewed every month beat twenty reviewed never. The dashboard's value is the rhythm — numbers, reviewed, acted on, repeated.

Know where your books stand — before a lender or buyer tells you.

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