Understanding your business finances goes beyond just looking at your bank balance. Here are five essential metrics every entrepreneur should monitor regularly.
1. Cash Flow
Cash flow is the lifeblood of your business. It measures the money coming in versus going out. Positive cash flow means you can pay bills, invest in growth, and weather unexpected expenses.
Formula: Cash Inflows – Cash Outflows = Net Cash Flow
2. Gross Profit Margin
This metric shows how efficiently you’re producing goods or services. A healthy margin means you have room to cover operating expenses and generate profit.
Formula: (Revenue – COGS) / Revenue × 100
3. Average Collection Period
How long does it take clients to pay you? A shorter collection period improves cash flow. In Portugal, the legal payment term is typically 30-60 days.
Formula: (Accounts Receivable / Total Credit Sales) × Days
4. Current Ratio
Can you pay your short-term obligations? A ratio above 1 means you have more current assets than current liabilities.
Formula: Current Assets / Current Liabilities
5. Customer Acquisition Cost (CAC)
How much does it cost to gain a new customer? Compare this to customer lifetime value to ensure sustainable growth.
Formula: Total Marketing & Sales Costs / New Customers Acquired
Track with EasyFin
EasyFin’s dashboard automatically calculates these metrics from your TocOnline data, giving you real-time insights into your business health.