In creating a dashboard, just about every business owner should concentrate on three important areas:
1. Growth. Hey, who doesn’t aspire to growth? But, if not planned for and controlled, companies can literally grow themselves right out of business. To manage your growth, monitor:
- Debt to Equity: Total Debt / Shareholder’s Equity
- Debt to Tangible Net Worth: Total Liabilities – Debt / Net Worth – Intangible Assets + Debt
2. Cash flow. Poor cash flow, not slow sales or lagging profits, is one of the leading causes of business bankruptcy. To help circumvent future cash flow squeezes, keep a close eye on:
- Current Ratio: Current Assets / Current Liabilities
- Days Sales Outstanding (DSO): Number of Days × Accounts Receivable / Credit Sales
3. Inventory. Many companies waste valuable cash by allowing slow-moving inventory to sit idle on their shelves for too long. To more carefully watch your inventory, track:
- Inventory Turnover: Cost of Goods Sold / Average Inventory
- Average Days to Sell: 365 / Inventory Turnover Ratio
