10 financial KPIs every SME should review every month
You don't need a dashboard with fifty figures. With ten well-chosen indicators you know whether the business makes money, whether cash will hold and where to act.
Many companies track a single figure: sales. But selling more doesn't guarantee earning more or having cash. These ten indicators, reviewed every month, give you the full picture in a few minutes.
Profitability
1. Gross margin. Sales minus the direct cost of what was sold (materials, subcontractors, direct labour), as a percentage of sales. If it falls, review prices, purchasing or discounts before it eats into profit.
2. EBITDA. Operating profit before interest, taxes, depreciation and amortisation. It shows whether the business, as it runs today, generates money. It's also the figure banks and buyers look at.
3. Monthly and year-to-date result. Compared with budget and with the same period last year. What matters isn't just the figure, but understanding why it deviates.
4. Break-even point. The minimum sales needed to cover all fixed costs: fixed costs ÷ contribution margin percentage. Knowing how much you need to sell each month not to lose money helps set realistic targets.
Cash and working capital
5. Cash balance and forecast. How much is in the bank today and how much there will be over the coming months according to your cash flow forecast. Today's figure without the forecast is misleading.
6. Average collection period. How many days customers take to pay: trade receivables ÷ annual sales × 365. If it rises, you're financing your customers with your own cash.
7. Average payment period. How many days you take to pay suppliers. Comparing it with the collection period tells you whether working capital is working for you or against you.
8. Inventory. If you hold stock, days of inventory or turnover. Stock that doesn't move is money sitting in the warehouse.
Financial strength
9. Leverage. Net financial debt (bank debt minus cash) divided by annual EBITDA. It shows how many years of activity it would take to repay the debt. The higher it is, the less room for new financing.
10. Productivity. Sales or margin per employee. It helps you spot whether headcount growth comes with more business or just more cost.
How to use them
- Always with a comparison: against budget, against last month and against the same month last year. An indicator on its own says little.
- By business line or customer where possible: the company average can hide a line that loses money.
- With alerts: set a threshold for each indicator (for example, a minimum cash balance or a maximum collection period) and look first at the ones that cross it.
- With a meeting: indicators only help if they lead to decisions with an owner and a date.
From spreadsheet to dashboard
You can start with a spreadsheet fed from your accounts every month. When preparing it starts to take longer than analysing it, it's time to automate your reports so the indicators update themselves.
In our management control service we prepare these indicators every month, with traffic lights and alerts, and review them with you. If you'd like to see it applied to your company, tell us about your case.