Monthly Financial Review Metrics That Matter
In this episode, I cover the final component of a financially fit tracking system: financial review. I explain why reviewing financials visually, through graphs rather than raw numbers, leads to better understanding and better decisions for business owners.
On the P&L side, I walk through revenue, gross margin, overhead, net profit per unit of revenue, and productivity ratios, including why payroll ratios are counterintuitive and must trend downward. I also explain how trailing 12-month data removes seasonality and reveals long-term trends.
On the balance sheet side, I break down liquidity ratios, debt ratios, usage ratios like receivable and inventory days, and why working capital is the single most important indicator of a company’s financial health. Together, these metrics create a complete monthly review process that helps business owners spot issues early, protect cash flow, and make confident decisions.