Thrive Business & Professional Magazine Summer Issue - Page 23

Net Profit is often the primary measurement owners use to gauge Businesses must analyze their working capital requirements and the success of their business. It’s also important to manage cash the overall risk to their organization. A current ratio that is higher flow properly to help you stay in business. than industry standards may suggest inefficient use of resources tied up in working capital. On the other hand, a current ratio 4. Current Ratio Current ratio is one of the most fundamental liquidity ratios. It measures the ability of a business to repay current liabilities with current assets. Here’s the formula: lower than industry standards may suggest liquidity problems for the company. Tracking this indicator may give you advance warning of cash flow problems, especially if your current ratio dips into the danger zone. 5. Pipeline Closure Ratio This ratio measures the total number of clients who enter Current ratio = current assets/current liabilities the sales pipeline as prospects versus the number of clients who actually end up as a sale. It could also be the number of proposals or quotes provided versus number of jobs that were won. This ratio provides a measurement of the effectiveness of your sales channel whether it is sales people calling on customers or customers visiting your website. 6. Aging Accounts Receivable If your business sends bills to customers, an accounts receivable aging report can be eye-opening. If customer A consistently pays her bills within 15 days, while customers B, C, and D drag their payments out to 90 or even 120 days, you may have found a root cause of your cash flow problems. It could be time to start charging interest on overdue accounts or let go of slow-paying clients. As you monitor your business you may discover that other KPIs are needed in addition to the ones mentioned. The process of monitoring and managing your business financials may not be an easy process at first, but the Florida Small Bus W72FWfVV@6VFW"67B2FRF2BvVFvRF767@'W6W72vW'2FW&W7FVBFWfVr6WBbW'6ƗV@( 2FVffV7FfVǒvRFV"'W6W72B6&RFVFGW7G'7FF&G2d"$Rd$DखbRvVBƖRF66VGVRg&VR6fFVF6V6VƖp6W76vFFRd4$D263bӓbCsbwwrF&fVfvW"6F&fR'W6W72b&fW76vR2#`#