Skip to main content Your business health checklist: how often should you track your financial metrics?
Everyone wants to keep their business in rude health, and the first step is understanding your numbers. If you keep an eye on your financial metrics at the right times, you’ll be able to make decisions backed up by solid strategies and smart budgets.
So without further ado, what should you be tracking - and when?
Daily
Track your time
This isn’t just for businesses billing customers by the hour - tracking your time each day can be a great way to spot efficiency opportunities. How much time do you really spend on admin? Could you outsource any of that to do more of what makes your money?
Weekly
Chase overdue invoices
Once a week, check your invoices that are out for payment - are any payments late? If so, here are some email templates to help you chase them up.
Review running costs
Have you got any big bills coming in or do you see any unexpected costs? If yes, will you have the cash available to cover them? How sure are you that the necessary cash will come into your bank account in time?
Check your out-of-pocket expenses
Make sure you’ve recorded all your out-of-pocket expenses for the week. The more regularly you add these, the easier it’ll be to stay on top of them so you don’t find yourself short of cash… and the more accurate your data will be.
Reconcile bank balance
Check regularly that the balance showing in your accounting software or spreadsheets matches the balance of your bank statement.
If it doesn’t, you should reconcile the two numbers. Make sure all your bank transactions are included in your accounts - and make sure you haven’t got any duplicates! If you spot any mistakes, you can manually add any missing transactions or match any duplicates together in your accounting software. Read more about reconciliation in FreeAgent.
Monthly
Check your Profit & Loss report
Your business’s profit & loss (P&L) report tracks your business’s income and running costs for a given period of time. You can dig into the numbers that make up the totals on the P&L report to identify areas for improvement, such as whether you might want to increase your prices or try to cut your costs.
If your business is a limited company that’s paying dividends to its shareholders, remember that you need to check that it has enough profit available after corporation tax is taken off to cover those dividends. FreeAgent’s real-time Corporation Tax estimates help you make sure the company will have enough post-tax profit before it declares a dividend.
Forecast cashflow
Preparing and looking at your forecasted cashflow for the next 90 days will give you part of the bigger picture for your business and help you plan well ahead for any large bills.
It might help you spot seasonal trends in your income, allowing you to put more aside when the business is doing well to help cover any fallow periods. FreeAgent’s Cashflow dashboard makes it easy to understand your cashflow with automatic updates and manual events that let you test different scenarios to make sure your business is prepared for the best of times, and the worst of times.
Calculate customer acquisition cost (CAC)
To work out your customer acquisition cost, you’ll want to choose a specific period and add up all of your sales and marketing expenses during this period, along with any other costs that relate to bringing new customers on board (like certain employees’ wages, or CRM software). Then divide this total by the number of new customers you got during that period and you’ve got your CAC.
£(Sales expenses + marketing expenses) / new customers = £CAC
What’s a good CAC for your business? Well, it depends on your average sale value per customer, or customer lifetime value. Your customer lifetime value must exceed your CAC to make a profit over time, so understanding these numbers will help you set your marketing budget.
Track conversion rates
Conversion rates are marketing metrics that show digital engagement with your brand. An example would be the percentage of visitors to your website who complete a specific action, like buying from you. This will help you understand how successful your business is at turning visitors into customers. And, if you measure conversion rates for individual marketing campaigns, you’ll start to see where your marketing budget would be most effective.
Quarterly
Check your tax calculation
No one likes a surprise tax bill, so it’s worth checking your tax calculation every few months to make sure you’re putting enough money aside to pay your tax bills.
Why quarterly? Making Tax Digital (MTD) moves many sole traders and landlords onto quarterly submissions for Income Tax, so HMRC will be providing up-to-date tax calculations after each of your Income Tax updates. For VAT, and Corporation Tax for limited companies, if all your data is in FreeAgent, the tax calculations will be updated in real time as you post your transactions.
Understand customer concentration
Customer concentration is important to check several times a year. High customer concentration means your business is overly dependent on a small number of customers - so if you were to lose one of these big spenders, your income could take a significant hit.
FreeAgent’s Radar feature automatically alerts you to high concentration levels, while the Customer Sales report allows manual calculation and analysis if you want to dig deeper.
Calculate customer retention
It’s not just about new customers! Another way to measure how well your business is doing is customer retention - aka how many of your customers return to buy from you again and again. These loyal customers provide security, and improve your customer lifetime value.
If you’re looking to improve your customer retention rate, here are a few of our savvy strategies.
Annually
Final tax calculation
Once a year, view your final tax calculation to check exactly how much tax you’ll owe.
To see this, you’ll need to make sure you’ve added all the relevant information into your tax return early to avoid cashflow issues when the bill is due. Find out what you need to complete your Self Assessment, MTD for Income Tax, VAT returns and Corporation Tax and Final Accounts.
Review end-of-year cashflow
Return your friendly Cashflow dashboard and take a look at your cash reserves. If you have the cash to spare, you might be able to invest in new equipment or another employee to boost your business efficiency. And if you do it before the end of your accounting year, you could claim those capital allowances from that year’s profit.
Recalculate customer lifetime value
Once a year is a good frequency to recalculate your customer lifetime value. This tells you the average income your business generates per customer. That knowledge will help you plan your marketing budget and focus your efforts into attracting higher-value customers.
Benchmark performance
So, after all this, you’ve got a pretty good idea of how your business is performing, and areas you might be able to improve. But you don’t work in a bubble. Performance benchmarking will help you see how you’re performing in the wider market.
It can be a very manual job - collecting reports from trade associations, government sources or industry publications to find key metrics or networking with peers - but FreeAgent’s Performance Benchmarking report does the hard work for you. It can show you how your business’s quarterly performance compares to similar businesses in your industry.
