How to Stay on Top of Your Numbers
For Small and Medium-sized Enterprises (SMEs), success isn’t just about increasing sales — it’s about tracking the right financial indicators consistently. Knowing what to monitor, when to intervene, and how to make decisions based on data can mean the difference between thriving and simply surviving.
This article explore the essential financial Key Performance Indexes (KPIs) every SME owner should track — with practical examples and perspectives from both developed and developing markets.
Why Tracking KPIs Matters for SMEs
Large corporations have accounting and finance teams, and also invest in software that shows dashboard which provides snapshot of key financial metrics. SMEs, often operates with lean resources and cannot afford huge investment in software, notwithstanding must be intentional in tracking financial KPIs. Tracking key performance indicators (KPIs) allows you to:
- Know if your business is truly profitable.
- Predict cash flow issues before they cause embarrassment.
- Make confident managerial decisions on pricing, hiring, or expansion.
- Communicate effectively with banks, investors, or partners based on been well informed of the business’s financial KPIs.
Note that even if you don’t have an in-house accountant, you can still manage your business like a pro — with the right support and tools.
Financial KPIs Every SME Should Track
Here are 8 must-track financial KPIs — explained with practical implementation tips.
- Gross Profit Margin (%)
Formula:
(Revenue – Cost of Goods Sold) ÷ Revenue × 100
Why It Matters:
Shows how efficiently goods or services are being produced by the business. A low margin might mean costs are too high or pricing is too low.
Example:
- A bakery in Lagos earns ₦5,000,000 in revenue and spends ₦3,000,000 on raw materials for a month.
Gross profit margin = ₦ (5,000,000 – 3,000,000) / ₦5,000,000 × 100 = 40% - In Australia, retail SMEs typically aim for margins between 30–50%, depending on the industry.
How to Use It:
Review monthly. If the margin drops, review suppliers’ costs, production efficiency, or pricing. Cheaper and alternative production materials can be introduced to reduce costs and improve gross margin.
- Net Profit Margin (%)
Formula:
Net Profit ÷ Revenue × 100
Why It Matters:
Measures how much is the final profit after deducting all expenses and is expressed in %. This is usually referred to as the bottom line. This should not be in red (loss).
Example:
- A small IT firm in Nairobi generates $5,000 in revenue monthly. After rent, salaries, and other costs, it nets $800.
Net margin = $800 / $5,000 × 100 = 16% - Many successful SMEs in developed markets target a net margin of 10–20%.
- Operating Cash Flow
Why It Matters:
Profit means little if there’s no cash in the bank account. This KPI tracks how much cash the core operations generate — aside inflows from loans or investments.
Example:
- If a business generates large amount of sales but have late payments by customers, this will delay business obligations like payment of salaries that has a big consequence for the business. Thus, credit terms/debt collection has to be reviewed/improve.
- Accounts Receivable Days (Debtor Days)
This measure how long it takes to turn credit sales to cash
Formula:
(Accounts Receivable ÷ Sales) × Number of Days
Why It Matters:
Tracks how long customers take to pay. The longer it is, the more it strains your cash flow. Moreover, it can be regarded as financing other people’s businesses.
Example:
- An SME in Ghana improved cash flow by reducing debtor days from 45 to 20 using mobile invoicing apps like Slydepay.
- SMEs in the UK use automated reminders and early payment discounts to speed up collections.
Target: 30 days or less for most SMEs.
- Current Ratio
This is a liquidity ratio that measures whether a firm has enough resources to meet its short-term obligations as and when due.
Formula:
Current Assets ÷ Current Liabilities
Why It Matters:
This is a measure of liquidity — can you cover your short-term debts with current assets?
Benchmark:
A current ratio (current asset : current liabilities) of 2:1 is generally healthy.
- Customer Acquisition Cost (CAC)
This metric measure the total amount a company spends to gain a new customer. It is crucial for businesses to gauge their profitability on new customer acquired and optimize marketing strategies.
Formula:
Total Marketing & Sales Costs ÷ Number of New Customers
Why It Matters:
This tells you how much it costs to bring in each new customer — and if your marketing spend is effective.
Example:
- A Nigerian online fashion brand spent ₦100,000 on influencer ads and got 50 new customers. CAC = ₦2,000.
- In the U.S., SaaS startups often monitor this weekly and pair it with Customer Lifetime Value (CLTV).
- Revenue Growth Rate (%)
This rate measures the percentage increase in revenue over a specific period, usually a year, quarter or month. It is use to track financial performance and overall revenue growth.
Formula:
(Current Period Revenue – Previous Period Revenue) ÷ Previous Period Revenue × 100
Why It Matters:
Measures business momentum. Flat or declining growth needs quick attention.
Example:
- A logistics startup in Kenya saw 12% MoM growth after switching to digital order tracking.
- A UK SME saw growth stagnate until it diversified into new customer segments — flagged early by revenue trend analysis.
- Burn Rate (for startups)
This is a financial term that refers to the rate at which a company spends its cash or capital typically expressed as a monthly amount.
Why It Matters:
Especially for startups or SMEs relying on external funding, burn rate shows how long your cash will last.
Example:
If you spend $10,000/month and have $50,000 in the bank, your runway = 5 months.
💼 How a Virtual CFO Can Help
Hiring a full-time CFO may be out of reach for many SMEs — but virtual CFO offers:
- Regular financial reviews
- Budget planning and forecasting
- KPI monitoring and interpretation
- Strategy support for pricing, fundraising, and cost control
- Tax services
Whether you’re in Accra or Amsterdam, virtual CFOs now support SMEs globally using cloud accounting tools like Xero, QuickBooks, or Zoho Books.
Case in Point:
A small e-commerce company in Nairobi reduced expenses by 18% and doubled net margin in 6 months with the help of a virtual CFO who reviewed its vendor contracts and optimized logistics costs.
💡 Final Thoughts
The secret to sustainable SME growth lies in consistent, data-driven decisions. By tracking these KPIs monthly, you’ll gain clarity, build resilience, and make smarter business moves.
And remember: what gets measured gets managed.
You don’t need to do it alone — the right tools and a trusted virtual CFO can turn your numbers into a roadmap for growth.
Need help interpreting your KPIs or building a financial dashboard?
📩: info@hapi-dconsulting.com
M:+2348167922286
Our virtual CFO team supports SMEs across industries and countries.