Shawn Identifies for Forbes Financial Metrics that Could Give False Picture of Business Health

Growth-oriented business owners regularly review key metrics and performance indicators to gauge their company’s financial health. But in today’s data-rich environment, the real advantage comes when leaders and analysts are focused on the right metrics.

In a recent Forbes Financial Council discussion, I pinpointed a tool that while widely used, and helpful, is limiting because of its backward-facing focus. Going a step further, I recommended a more holistic metric that not only factors for what has already occurred, but also helps business leaders plan for the future.   

As an entrepreneur, I’m always looking down the road – anywhere from 6 months to 5 years - to position Spinnaker to seize the next big opportunity. That’s why I’m not a fan of focusing solely on your profit and loss indicators, which, by their very nature, are lagging metrics that give you a picture of where you’ve already been.

While I typically start with grounded insights on my business’ past and current financial health, I tend to lean more heavily on metrics that help me to assess my growth capacity.  I’m a big fan of operating cycle time, which is the time between making a capital investment and receiving payment from the end user. In leading a growth-oriented business, I need real-time information so I can smartly decide my next move, while maintaining a healthy bottom line.

Looking for other smart tips from the Forbes Finance Council Experts? Check out some additional metrics which could fail to give you the accurate financial report card you want – and need – for your business.