You’re busy building your product and your brand. You have to find, attract, and retain the right customers, not to mention employees. Let’s not start with the time and energy you spend raising capital.
Amid all this hustle, your startup accounting metrics are crucial. In this post, we’ll take a look at the numbers you need to track and why they’re essential. We’ll explore how startup accounting services can make the whole process a whole lot easier so you can focus on growing your business.
Why are startup accounting metrics important?
Startup accounting metrics don’t just matter to your investors. They tell your story. That story could be rags to riches… or back to rags if you don’t have an eye on these numbers.
Your metrics can tell you if your actions are working and what you may want to do differently. They can help you predict future outcomes and plan based on what that trajectory tells you.
Regularly tracking and reviewing your metrics keeps tabs on your progress. It can identify problems. And ultimately, you become a better decision-maker.
The truth is, far too many startups need to look at them more often to make better, data-informed decisions. So it’s no wonder that a US Bank study found that 90% of startups (and 82% of businesses in general) fail because they lack cash flow.
If there’s one point our startup CFO really wants us to hit home, it’s that cash flow is king. And coincidentally, it’s one of the startup and small business accounting metrics we’ll be covering today. Let’s get to it!
Most Important Startup Accounting Metrics
Revenue
It’s elementary. Unless you’re pre-revenue, you need to know how much you’re bringing in.
Revenue must be tracked in real-time. But you should also look at it weekly, monthly, quarterly, and year-to-year for context. An accounting system or accounting software can help you track this. You may also have an accounts receivable employee who can help assist you with this.
When looking at revenues over a more extended period of time, you’ll view it both in relation to other key performance indicators (KPIs). But you also need to see it in relation to itself visually.
Financial modeling is a practice that will help you better understand what your revenues are telling you.
This is a visual representation of key metrics like revenue over time. You better understand your revenue trend and can forecast revenue growth through it.
Profitability
It’s critical for business owners to know if they’re actually making money. When you do, you can adjust the variables to increase your profit margins over time and keep your investors happy.
A startup accountant or fractional CFO can help you track profitability over time and make data-informed suggestions you can use to increase profitability.
For example, startup accounting services may include running a startup cohort analysis. This financial tool helps you identify which customer has the highest customer lifetime value (CLV) for the lowest cost of acquisition (CAC).
Targeting these “dream customers” precisely increases profits.
Cash Flow
When you’re just “getting by”, one snag in operations, raw materials delay—or worse— an economic downturn can quickly take you into the red.
Only an infusion of venture capital keeps you afloat here. But your biggest financial backers have lost faith in you. They see a money sinkhole rather than an opportunity.
Many startups start in precarious situations. But the goal is to get out of it as quickly as possible.
Positive cash flow helps businesses weather seasonal slowdowns and the unexpected. It’s what defines the 10% of startups that survive.
Cash flow positions a startup owner for growth. You have money to invest in R&D, new markets, better equipment, and even that fractional CFO you desperately need.
A fractional CFO for startups specializes in helping companies that are just getting by achieve profitability and cash flow to grow.
Burn Rate
Do you know your burn rate? This is the rate at which you’re burning through startup capital as you trudge along toward profitability. This number can help you evaluate the financial health and longevity of your company.
The burn rate shows how long a business can exist without making a profit. How long can a business owner meet payroll, buy inventory, and keep the lights on? Not knowing this number could bring everything to a screeching halt.
What many forget when tracking burn rate is that you continue to burn through cash after you’re in the black. So this isn’t a zero-sum game.
Your burn rate is more likely to slow gradually as you begin making a profit until your business entity is entirely self-sufficient.
And that’s not an easy number to calculate—especially if you have variable expenses. Startup CFO services help you find this elusive figure. You can do so yourself by evaluating expenses through credit card statements, bank accounts and other financial statements and financial records. Once calculated, document this in a cash flow statement and compare month over month.
Knowledge is power here. When you know it, you can plan around it. And you can directly impact the rate you’re burning through capital to give yourself a chance to level up your cash flow.
Set yourself up for success by asking your outsourced accounting services to run this number. As your outsourced CFO, we’re just as interested in metrics as you are. We help you cut through the BS so that we can provide the best startup CFO services for your company.
Expenses
Of course, a critical factor in your burn rate is your expenses.
How much are you spending in each category? Where can you adapt to lower your expenses without sacrificing quality to increase profits?
You may already have an accounts payable manager, startup accountant or outsourced bookkeeping services tracking these expenses through invoices and other financial transactions. But you’ve reached a crossroads where you’ve outgrown bookkeeping. And it’s time for an upgrade to freelance CFO services to make your money work for you.
As your outsourced CFO for startups, we have years of experience helping companies like yours get their expenses down and profits up.
You have fixed expenses that stay mostly the same. These could include rent, Internet, web hosting, etc.
Then you have variable expenses. These are numbers your startup CFO will try to work with first to increase your profits and cash flow.
For example, inventory is the second largest expense for most small businesses (that sell a physical product), making up 25% of their budget. Whether you’re getting your per-unit cost down or better tracking trends to purchase order timing, getting this expense down can significantly impact this metric. But don’t sacrifice quality or customer trust to do it.
For Startup Accounting Metrics, Startup Accounting Services Can Help
When you’re in startup mode, you’re putting all your energy into building a better product. But it’s important to check in with your startup accounting metrics and other financial information. You need to know where you stand so you can make data-informed decisions.
Our startup CFO services help you start tracking the right metrics. We make it easy to review your numbers more frequently to gain valuable insights. It’s time to upgrade your outsourced bookkeeping to a fractional CFO that can deliver actionable insights. Schedule a Consultation to learn more.
The burn rate tells you how long you can exist without making a profit. How long can you meet payroll, buy inventory, and keep the lights on? Not knowing this number could bring everything to a screeching halt.
What many forget when tracking burn rate is that you continue to burn through cash after you’re in the black. So this isn’t a zero-sum game.
Your burn rate is more likely to slow gradually as you begin making a profit until your business is entirely self-sufficient.
And that’s not an easy number to calculate—especially if you have variable expenses. Startup CFO services help you find this elusive figure.
Knowledge is power here. When you know it, you can plan around it. And you can directly impact the rate you’re burning through capital to give yourself a chance to level up your cash flow.
Set yourself up for success by asking your outsourced accounting services to run this number. As you’re an outsourced CFO, we’re just as interested in metrics as you are. We help you cut through the BS so that we can provide the best startup CFO services for your company.
Expenses
Of course, a critical factor in your burn rate is your expenses.
How much are you spending in each category? Where can you adapt to lower your expenses without sacrificing quality to increase profits?
You may already have outsourced bookkeeping services tracking these. But you’ve reached a crossroads where you’ve outgrown bookkeeping. And it’s time for an upgrade to freelance CFO services to make your money work for you.
As your outsourced CFO for startups, we have years of experience helping companies like yours get their expenses down and profits up.
You have both fixed expenses that stay mostly the same. These could include rent, Internet, web hosting, etc.
Then you have variable expenses. These are numbers your startup CFO will try to work with first to increase your profits and cash flow.
For example, inventory is the second largest expense for most small businesses (that sell a physical product), making up 25% of their budget. Whether you’re getting your per-unit cost down or better tracking trends to purchase order timing, getting this expense down can significantly impact this metric. But don’t sacrifice quality or customer trust to do it.
For Startup Accounting Metrics, Startup Accounting Services Can Help
When you’re in startup mode, you’re putting all your energy into building a better product. But it’s important to check in with your startup accounting metrics. You need to know where you stand so you can make data-informed decisions.
Our startup CFO services help you start tracking the right metrics. We make it easy to review your numbers more frequently to gain valuable insights. It’s time to upgrade your outsourced bookkeeping to a fractional CFO that can deliver actionable insights. Schedule a Consultation to learn more.
