For many small and early-stage businesses, serving customers and running day-to-day operations can be enough to overwhelm the day. But it’s critical that these organizations carve out time to tend to their financial health daily, or at the bare minimum several times a week. With so many different metrics to track, it’s important to identify those that give you a line of sight into how your business is performing, as well as those that help you pinpoint issues brewing below the surface.
Recently, the Forbes Financial Council asked me to weigh in on the financial metrics that are critical for small businesses to track. As a small business owner myself, knowing what money is coming in (and when) and understanding my short- and long-term expenses helps me to rest a little easier each night. That’s why it was a logical step to stress the importance of minding an organization’s operating cash cycle.
The more you understand that cycle, the more you can be positioned for future opportunities. In fact, a study from U.S. Bank shows that 82% of companies fail due to poor cash flow management. Your operating cash cycle is the time it takes for cash to become available after capital investment. Tracking this metric regularly will give you the insights you need to determine if you’re in a financial position to take a growth step.
Interested in more intel from my fellow Forbes Finance Council panel members? Here are a few other financial reports you may want to keep an eye on.