---
title: Financial KPIs
summary: The eight lagging and leading financial KPIs that show you both what happened and what is coming.
est_minutes: 6
sort: 4
---

Most financial reviews happen after the fact.

You close a month. You get the P&L. You look at the numbers. And you find out, four to six weeks after it happened, how the business performed.

That is not financial management. That is financial archaeology.

The P&L is a lagging indicator. It tells you what happened. It cannot tell you what is about to happen.

The operators who stay ahead of their business financially are not smarter or luckier than the ones who are constantly reacting. They are tracking a different set of numbers.

Lagging indicators tell you what happened.

Leading indicators tell you what is coming.

This module introduces the eight financial KPIs that give you both.

**Lagging Vs. Leading Indicators**

A lagging indicator confirms a trend after it has already established itself. Revenue, net profit, and gross margin are all lagging indicators. By the time they show up on your P&L, the decisions that created those results are already in the past.

A leading indicator signals what is coming before it arrives. Days in accounts receivable tells you whether cash is about to tighten. Burn rate tells you how long the business can operate at its current pace before cash runs out. These numbers do not wait for month-end to tell you something is wrong.

The goal of a financial KPI dashboard is to track both: lagging indicators to confirm the health of what already happened, and leading indicators to give you time to respond to what is coming before it becomes a crisis.

Eight KPIs. Four lagging. Four leading. One dashboard. Thirty minutes per month to update.

**The Four Lagging KPIs**

KPI one: Gross Margin.

Gross Profit divided by Revenue, multiplied by 100. This is your production efficiency ratio. It tells you how much of every revenue dollar survives the cost of delivering it. Track this monthly. If gross margin compresses over time while revenue grows, your growth is costing you money you are not recovering in price.

KPI two: Net Margin.

Net Profit divided by Revenue, multiplied by 100. The percentage of revenue the business actually kept after all expenses. This is the bottom-line health indicator. Compare it to your budget target from Module 03 monthly. A net margin consistently below target means either revenue is underperforming, expenses are over-running, or both.

KPI three: Revenue Per Employee.

Total Revenue divided by total headcount, including owners and part-time contractors weighted by hours. This is your operational leverage ratio. As the business grows, revenue per employee should increase as systems and processes become more efficient. If it stays flat or declines as you add headcount, the new capacity is not generating proportional output.

KPI four: Customer Acquisition Cost.

Total sales and marketing spend divided by the number of new customers acquired in the period. This is the unit economics measure of your growth engine. If customer acquisition cost is rising while average revenue per customer stays flat, the marketing model is becoming less efficient. Track it quarterly and compare it against the lifetime value of a customer to evaluate whether your growth is actually profitable.

**The Four Leading KPIs**

KPI five: Burn Rate.

Total cash spent per month on operating expenses, regardless of revenue. This is your floor cost: the minimum cash the business consumes every 30 days just to stay open. Know this number. Compare it to your cash balance. It tells you how long you can operate if revenue stops or drops significantly.

KPI six: Cash Runway.

Current cash balance divided by monthly burn rate. The result is the number of months the business can operate at its current pace before running out of cash. A runway of three months or less is a warning state. Six months or more is a healthy buffer. This number should be updated every time your cash position changes materially, not just at month-end.

KPI seven: Accounts Receivable Days.

Outstanding accounts receivable divided by average daily revenue. This tells you how many days on average it takes to collect from clients. If AR days is creeping up month over month, cash is slowing down even if revenue is growing. An increase in AR days of more than 15 days from your baseline is a cash flow signal that requires attention before it shows up as a bank account problem.

KPI eight: Inventory Turns.

For product businesses: Cost of Goods Sold divided by average inventory value. This measures how efficiently you are converting inventory into revenue. Low inventory turns mean cash is sitting in stock that is not moving. High inventory turns mean you are at risk of stockouts if demand spikes. For service businesses, the equivalent is utilization rate: billable hours divided by total available hours. Track whichever applies to your model.

**Your Action Step**

Your worksheet for this module is the Financial KPI Dashboard.

It sets up all eight KPIs with formulas, your current baseline reading, and a monthly tracking grid. By the end of the first month, you will have a real-time picture of both what happened and what is coming.

Module 05 is Margin Analysis: the module that breaks your profitability down by product, service, and client. You already know your overall margin from the P&L work in Module 01. Module 05 goes one level deeper to show you which parts of your business are actually driving that margin and which parts are quietly dragging it down.

Set up the dashboard. Then we go deeper on margin.
