Here's how you can effectively track your business's financial performance.

Analyze your cash flow with the help of a finance analyst. Make out a chart to guide the outflow and inflow of money, which is another crucial pillar.

Cash is king, so understanding your cash flow is important, specially your free CF. For many companies that are looking to attract investors through dividend or are considering M&A activities, CF becomes even more important. Another important metric, tied to CF, will be year over year (or even quarter over quarter) changes. This can signal to the market that the organizations is very good at managing the cashflow.

Effectively track your business's financial performance by closely monitoring cash flow. Use accounting software to record income and expenses regularly. Analyze monthly cash flow statements to understand patterns. Perform cash flow forecasting to anticipate future financial needs and avoid shortfalls. Keep an eye on accounts receivable and payable, ensuring timely collections and payments. Regularly review and adjust your budget to reflect real-time financial health, enabling informed decision-making.

I think we do not often place as much priority and importance on cash flow as we do other component of financial statements. The cash flow is actually the singular most important information to consider when analysis the financial health of the organization. I would say it is the blood of the organization, Just as the human body cannot function without a good pumping blood. It is a more accurate measure of the financial health of the organization. It must be emphasize that every business must understand the sources of cash inflows and outflows.

As Peter Drucker said: "You can only manage what you can measure." Cash flow is a crucial indicator of any business's financial health. Regularly monitoring your operational, investment, and financing cash flows enables more informed decisions. A positive cash flow not only covers obligations but also allows for new investments and resilience to market fluctuations. Measuring and effectively managing cash flow is essential for sustainable business growth.

For a fact balance sheet provides a different perspective looking at financial result from the point of view of what the business owns and what it owes. It contains the assets, liabilities and equity of the business. Balance sheet provides useful data for the calculation of financial ratios.

Think of the balance sheet as a financial snapshot capturing a company's pulse. This essential tool helps stakeholders gauge financial health, guides investors in making smart choices, and shows lenders if loans can be repaid. For management, it’s a roadmap for tracking progress and planning future moves.

For a services company, following business financial ratios can provide unique insights into how the company is performing. Revenue per Employee: Total Revenue / Number of Employees Customer Acquisition Cost (CAC): Total Sales and Marketing Expenses / Number of New Customers Acquired Billable Utilization Rate: (Billable Hours / Total Available Hours) × 100 Project Overrun Ratio: (Actual Project Cost - Estimated Project Cost) / Estimated Project Cost Revenue per Client: Total Revenue / Number of Clients Net Promoter Score (NPS): Formula: % of Promoters - % of Detractors These one helps company monitor performance, identify areas for improvement, and make strategic decisions to enhance overall efficiency and profitability.

From my experience dealing with investors, I think the financial rations are becoming a more important metric. I believe that this is partly because it allows investors to compare different investment opportunities "apples to apples". In many cases, using financial rations also allows to reduce the noise that some analysis have when the business operations has had a significant change.

Financial ratios provides a more useful and meaningful understanding of the financial statements. With ratios we can use numerical values to put financial results into better perspectives. From ratios we can better understand growth patterns and drivers, margins, profitability, leverage, liquidity etc. We can use ratios to track performance, benchmark, and or make inferences and predictions about future events using historical results.

Trend analysis is about looking at past data to spot patterns and predict future outcomes. To get started, collect data over time and use tools to see any trends. Compare what's happening now with past data to see if there are any changes or continuities. Keep updating your analysis to refine your strategies based on the latest information.