As an accountant, you don’t need to be sold on the benefits of data analysis. Data may be a four-letter word to many, but for accountants, data can reveal meaningful insights that you can use to mitigate risks, improve your processes, and increase your overall efficiency. However, there are hundreds of data points that you can evaluate when operating your accounting firm, so which ones should you focus on? In this post, we discuss the most impactful metrics to consider.Data can reveal meaningful insights that you can use to mitigate risks, improve your processes, and increase your overall efficiency. Click To Tweet
- Accounts Payable – Accounts payable is the amount of money that a company owes to creditors, vendors, or suppliers for products or services rendered. It’s important to keep up with this metric so that you don’t fall behind on your outstanding debts.
- Accounts Receivable Turnover Ratio – Accounts receivable turnover ratio measures a company’s ability and effectiveness in collecting its average accounts receivable. This data specifically shows how many times per year your firm converts outstanding accounts receivable into cash.
- Annual Recurring Revenue – For subscription-based services (or those that require recurring billing cycles or contracts), annual recurring revenue measures the revenue that an accounting firm can generate from its customers. This metric is important because it allows a company to predict future growth.
- Average Days Delinquent – This data shows the average number of days that it takes for a company to get paid on an outstanding invoice. Knowing your average days delinquent metric will help you evaluate and improve your collection process.
- Average Revenue Per Customer – Average revenue per customer is the amount of revenue that your firm generates for each customer. It’s typically calculated on a monthly basis. This metric helps you determine if your current pace is sustainable or if you need to re-evaluate your efforts.
- Bad Debt to Sales Ratio – This metric refers to the number of sales that are ultimately declared as bad debt, i.e. money that you cannot recover and must write off as a loss. This happens when a client cannot repay, and the effort to recover the debt becomes more expensive than the debt owed.
- Customer Acquisition Cost (CAC) Payback – Customer Acquisition Cost (CAC) payback refers to the number of months it takes to break even between the amount you paid to acquire a customer and the amount of revenue you can generate from that same customer. The goal is to shorten your CAC payback period. This indicates that you’re spending less for acquiring new customers.
- Cash Burn Rate – Burn rate refers to the amount of money your accounting firm needs to cover its expenses within a specific period of time (i.e. a month). Knowing your cash burn rate can prevent you from over-spending and running out of money in the future.
- Cash Flow – Cash flow can be negative or positive and refers to the movement of cash into and out of a company during a specific time period. When cash flow is negative, it indicates that more money is moving out of it than going back into it. When a cash flow is positive, it means that more money is moving into it and less money is moving out.
- Cost of Customer Acquisition – This metric refers to the amount of money that a company spends to turn a lead into a customer, i.e. acquire a new customer.
- Cost Per Hire – In terms of recruitment, cost per hire is a metric that measures how much a company will spend to hire each new employee.
- Cost Per Invoice – This metric refers to how much you spend to process an invoice. It can reveal opportunities to streamline your invoicing process.
- Cost Variance – This metric calculates the difference between how much you budgeted for a project and the actual amount you spent to complete the project. You can use this metric to track your performance and reduce risks.
- Customer Churn Rate – The customer churn rate, also known as the rate of attrition, refers to the percentage of customers who cancel or leave your service during a specific time period.
- Customer Lifetime Value – This metric indicates the total account of income a company is able to generate from a single customer during the totality of their relationship.
- Customer Retention Rate – The customer retention rate refers to the percentage of customers that your accounting firm is able to retain during a specific period of time.
- Debt to Equity Ratio – This metric measures a company’s total debt in relation to its total equity. It indicates how much debt a company uses to operate. It’s important because it reveals a company’s financial stability. A high debt to equity ratio indicates financial distress. But a low debt to equity ratio may indicate inefficient financial practices.
- Gross Profit Margin – Gross profit margin is the amount of total sales revenue that a company retains after subtracting the cost of goods sold (COGS), or the amount a company spends on labor and materials.
- Invoice Cycle Time – This metric tracks how long it takes for a company to process an invoice. A close examination of this metric will help you identify the efficiency of your invoicing process.
- Invoices Processed Per Year Per Full-Time Employee – With this metric, you calculate the productivity of your full-time employees. This metric helps you identify your efficiency level.
- Lead-to-Client Conversion Rate – In sales, this is also known as the lead conversion rate. It is the number of leads that become new customers. It measures how effective your sales team is at converting marketing leads into paying customers.
- Monthly Recurring Revenue (MRR) – This metric is the total revenue that a company generates in one month.
- Net MRR Growth Rate – This metric indicates the net increase or decrease in monthly revenue from one month to the next month.
- Net Profit Margin – This metric measures how much net profit is obtained from the revenue generated. It indicates what portion of income becomes profits.
- Net Promoter Score – The Net Promoter Score is a research metric used to measure customer loyalty and satisfaction and is acquired through surveying customers.
- New Client Growth – This metric indicates how quickly you can gain new customers in a specific period of time.
- Operating Margin – This metric is the percentage of profit that a company makes after covering its operating expenses. Your operating margin indicates your level of efficiency in managing your expenses.
- Realization Rate – This rate is the ratio between how many hours you work and how many hours your client paid you.
- Return on Equity – This metric measures a company’s ability to generate returns on an investment by its shareholders.
- Year-Over-Year Profitability – This metric helps a company evaluate its performance from one year to the next. It helps you identify whether or not your company is growing.
To make smart decisions that grow your accounting firm, you need data. Acquiring and analyzing data is the key to your ongoing success. While you may not need to use all of the above metrics in monitoring the health of your firm, you will find value in incorporating at least some of these critical metrics.
Not sure where to start? Check out our software. We include the top metrics that every accounting firm should check for. Click here to learn more about Mango’s reporting and analytic features.
Are you looking for ways to streamline your accounting firm’s operations, enhance…
Are you ready to transform your bookkeeping services from standard to stellar?…
If client onboarding is a journey, you’re the dependable guide. It’s your…
In the accounting industry, time management is essential. Every minute counts. This…
As we approach the 2024 tax season, it’s the perfect time to…