Do you know how your business is performing right now?

That’s a tough question to answer because the numbers change every day. Your financial statements can tell you what’s happening, but they take time to prepare and interpret.

That’s why Key Performance Indicators (KPIs) are such a useful tool. The basic idea: Identify a small set of key numbers that tell you what's happening in critical areas of your business, then look at those numbers on a regular basis (daily, weekly, monthly). Doing so will give you a quick read on how your business is performing so you can a) address problems while they’re still small and b) make better management decisions.

There are tons of different KPIs out there and the concept can feel scary at first, but it’s not molecular physics. At Scooter, we focus primarily on financial KPIs (as opposed to operational KPIs) and here are a few examples to show you what I mean:

• Cash on Hand: As they say, “cash is king” and you need to watch it closely. This should include your current bank balance plus any undeposited funds you have.

• Accounts Receivable (A/R): Another crucial number, almost as important as cash. In addition to tracking your total A/R balance, you should keep a close eye on your A/R aging and overdue invoices.

• Total Sales: No surprise here, every business owner wants to know what’s happening with sales. In addition to tracking total sales, you can slice and dice your sales results in different ways (for example, by customer or product or location) to identify trends and variances.

• Gross Profit: Tells you how much profit the business is making before operating expenses have been paid. Accountants like to look to look at this number in both dollar and percentage terms (also known as “Gross Margin”).

• Net Profit (or Net Income): Arguably the most important KPI of all. Net profit is the amount of money you’ve made (or lost) after all expenses have been paid.

• Top Five Monthly Expenses: Every business owner should know what their biggest monthly expenses are. I generally like to track the top five (sometimes more).

• Quick Ratio: One of my favorite ratios. The quick ratio (or “acid test”) tells you if your business has enough cash and liquid assets to pay current liabilities. A quick ratio of less than one is a trouble sign, it means you don’t have enough money to pay your bills.