10 Financial Metrics Every Business Owner Should Keep an Eye On

Did you know that when you are trying to track your business financial metrics, it is important to keep your personal and business finances separate by opening a dedicated business bank account?

Most people who own moving companies have no problem with generating ideas and launching services. The best ones know what it takes to encounter and nurture their first critical clients.

But there are lots of people who do not know what it will take to bring their business to the next level. One of the most important things you'll need to know how to do is track financial metrics.

To make things easier for you, we have written a guide. Keep reading if you are interested in finding out more.

1. Revenue

Revenue is the total income that a business takes in within a certain timeframe. It is one of the most important accounting metrics that you should know how to track.

There are lots of owners of moving companies who don't know the difference between sales and revenue. Sales are the income that you generate from products and services.

On the other hand, revenue includes all sources of income. This includes things such as interest and royalties.

2. Monthly Recurring Revenue

Monthly recurring revenue (MRR), is the predictable revenue that your business generates on a daily basis. The most common types of MRR include subscriptions, retainers (such as consultants), and service agreements.

Monthly recurring revenue can help you to create budget forecasts and to make confident business decisions because it is a more reliable type of revenue.

3. Fixed Costs

These are business expenses that will always stay constant, regardless of the amount of revenue that you are producing. It is easy to know what these costs are because they don't change month to month.

The most common types of fixed costs are rent that you pay for business locations, moving vehicles, insurance, and employee salaries.

4. Variable Costs

Variable costs will change in relation to the number of products or services that your business sells. In most circumstances, variable costs will usually increase when production or sales increase.

And they will decrease when sales decrease. The most common variable costs include shipping expenses and credit card transaction fees.

If you need help calculating the variable costs for your business, it is a great idea to hire an accounting service to help you.

5. Gross Profit

In the most simple terms, 'profit' relates to the economic benefit that business owners gain when their revenue surpasses their expenses or costs.

In business accounting, it is necessary to know how to differentiate gross profit from net profit. But these financial metrics will tell you different things about how your business is functioning.

If it costs you more to purchase your goods and services than the amount of money that you bring in from sales, this means that you aren't generating a gross profit.

For instance, imagine that you are a bakery owner and that the price of the ingredients and materials required for baking your signature loaves of bread is four hundred dollars. 

If you sell four hundred and fifty dollars worth of bread, this means that you've made fifty dollars on this bread. If you'd made five hundred and fifty dollars worth of bread, your gross profit would be one hundred dollars.

6. Net Profit

It is important to know what your gross profit is, but It will not give you a clear understanding of whether or not your business is financially profitable. Net profit will help you to figure this out.

Imagine that our bakery owner sells three thousand loaves of bread a year at ten dollars per loaf, and the cost of making each of these loaves of bread is seven dollars. Their gross profit for the year would be nine thousand dollars.

To figure out the net profit, you would need to include the cost of things such as labor, equipment, and other overhead expenses in your calculations.

If you run a moving company, it is important to know how to calculate net profit. If you do not know how to do this, consider hiring a financial consultant to help you out.

7. Net Profit Margin

Your net profit will tell you how much money is left over from the revenue your business has generated after subtracting additional costs and expenses.

But you will need to figure out your net profit margin if you want to know how much money your business keeps in earnings from the money it generates. This will help you know whether it is a good idea to stay in business.

8. Break Even

This is the point where your costs and revenue are equal. By knowing your break-even point, you will get a better idea of how to price your services.

9. Accounts Receivable and Payable

Accounts receivable is the amount of money that you expect to earn but have not yet been paid. Accounts payable is the money that you need to pay.

This includes invoices that people have sent you that you have not yet paid.

10. Cash Flow

Cash flow refers to the amount of money that is currently in your business account. You should make sure to run frequent cash flow projections.

This will make it easier for you to spend money responsibly. If you always have cash flow on hand, your business is more likely to be viable.

Understand the Different Kinds of Financial Metrics

If you own a moving company, it is essential that you keep an eye on your financial metrics.

Do you need help with bookkeeping? If so, Pro Mover Accounting can help you. Don't hesitate to contact us once you are ready to find out more about our services.