Xero Accounting Gold Champion Partner
We hope you enjoy reading the blog post.
If you want our team to do your accounting or tax for you click here.

Track your critical numbers for a successful business

Track your critical numbers

To track your critical numbers is the golden key to a successful business. Most businesses fail as a result of not being able to forecast difficult times and put measures in place to absorb those challenges. If you are one of the few customers we’ve met that exercise this due care already, good for you! If however, you are one of the masses still managing their affairs by looking at the bank balance, we suggest you start to track your critical numbers immediately, even if it is just one or two…

What Are Critical Numbers?

Before you can track your critical numbers, you need to know what they are, so…

Definitions first: Critical numbers are the numbers that determine your company’s success. When they move in the right direction, you know you’re on track toward achieving your objectives.

The numbers depend on your situation. For example:

  • The crisis critical number. If your business is struggling, your critical number is whatever ensures your survival. Cash in the bank. Reducing debt. Growing sales.
  • The basic critical number. That’s the number that has to be at a certain level year in and year out, or you’re in trouble. An airline’s percentage of seats filled. A factory’s output. Revenue per labor hour.
  • The weakness critical number. Your sales hover around your break-even point. Your return on assets is low, and your inventory accuracy lousy. You’re too dependent on one product. Move the number in the right direction, and you eliminate a weakness.
  • The opportunity critical number. You’ll rack up sales if that new product is out by August. You’ll land a big customer if you reduce your defect stock rate. A 2% increase in operating efficiency will enable you to undercut competitors’ prices.

How to track your critical numbers for a successful business

Determining Your Critical Numbers

If your company is in crisis, chances are you know the critical numbers already. They’re the ones you worry about in the middle of the night. Otherwise, figuring out the critical numbers is a three-step process.

  • Step 1: Analysis.
    What are the numbers that must be on track? What are your company’s strengths and weaknesses? Ask managers and employees for input. Talk to lenders, investors, and customers. Compare your financials with industry averages. Where are the biggest threats and opportunities in your marketplace?
  • Step 2: Objectives.
    You can’t do everything at once, so what’s most important to focus on right now? If you have a strategic planning process in place, you already know your key objectives for the next 12 months. If you don’t, sit down with your management team ASAP to determine one or two central goals, if only for the next two quarters. Since a company’s objectives may change over time, its critical numbers may change too.
  • Step 3: Determine the drivers you want to focus on.
    Here is where companies often screw up because objectives don’t always translate into actions. A goal of lower unit cost, for example, could be achieved by boosting sales volume, re-engineering business processes, managing labor hours or inventories more efficiently – or by some combination of these and other variables. What makes sense for your company?


How often should you track your numbers?

Daily, Ron Friedman insists. The CEO of Stonefield Josephson Inc., an accounting firm, says, “Every morning by 9:30, I receive a printed report that tracks certain key results from the day before. That’s a tremendous management advantage. I can respond immediately to any problem signals. Think of all the time and money you lose when you find out about problems only at the end of the week or the month.”

Friedman is convinced that watching numbers daily is as important for his clients as it is for his own 75-person accounting firm. “Depending on the type of business you’re in, the numbers you need to watch this closely will be different,” he explains. “Key numbers might be how much was sold each day, how much was shipped, how big your backlog is, and how much money was collected.” To make certain that daily reports are user-friendly, Friedman keeps them short. And he knows how numbers should compare with daily target results. “Small fluctuations are only natural, but once you track daily results for a while, you’ll get a feel for those fluctuations that are more troubling,” he notes.


Steer clear of managing the “wrong” critical numbers

Critical numbers are the key financial indicators that determine your company’s success. When they move in the right direction, you know you’re on track toward achieving your objectives. That means that choosing the right critical numbers to track is vital. Try to avoid these potholes that have side-tracked other companies.

  • Poor strategic planning. A company aims to increase gross margins. Marketers and salespeople dutifully concentrate on old, high-margin products and neglect newer but lower-margin ones. Result: company grows increasingly dependent on yesterday’s wares.
  • Identifying the wrong drivers. We hear the story of the hotel manager who wanted to increase profits by controlling expenses. Trouble was, he wasn’t filling enough rooms to make money no matter how low his operating costs. “His real critical number was his occupancy rate.”
  • Relying on bad information. A large service company wants to reduce the unit cost of delivering its service, so it shuts down small, apparently inefficient regional offices and transfers their functions to bigger cities. Only later does it discover the smaller offices were actually the low-cost deliverers.
  • The number nobody understands.”One company decided its critical number was economic value added (EVA),” a client recently mentioned. “They weren’t wrong. In fact, that measure reflected a lot of what they needed to do. But no one got it! They went a year and nothing happened.”
  • Premature self-congratulations.You do industry comparisons and find that your return on sales is high. No need for critical-number analysis? Look again. Maybe competitors are spending twice as much on R&D as you are. The idea is to identify weaknesses, not just strengths.



Ready to take your financial success to new heights?
How would it feel to have peace of mind knowing that your finances are in the hands of experienced professionals who are passionate about helping you maximise your financial potential?
Ready to experience the difference? Contact us today for a complimentary consultation and discover how our tailored accounting solutions can empower your financial future.
What our clients say?
Thrive CFO
Based on 10 reviews
powered by Google
Martin Mulder
Martin Mulder
12:36 17 Aug 23
I have only the greatest appreciation for this company. I was going through a difficult time and they were understanding and accommodating. My tax was handled speedily and efficiently.
Kevin Rademeyer
Kevin Rademeyer
07:20 17 Aug 23
We have been using Melissa, Marche and the rest of the crew at ThriveCFO for over 10 years, in order to compile our annual audit for Law Society. They have been exceptional, efficient and pro-active every year. I would not take the business anywhere else.
Jan de Wit
Jan de Wit
13:13 13 Jun 23
Our firm has been making use of the services of Thrive CFO for more than 10 years. Thrive CFO has amazing staff that is not only extremely helpful, but also very capable. We are extremely happy with their services and will continue to support them. They make accounting easy. Thanks Melissa, Marche and the rest of the Team - You Rock!!
LM Keyser
LM Keyser
07:13 13 Jun 23
The ThriveCFO team has been our trusted accounting and tax partner since 2010. They are competent, honest, approachable, quick to respond, and they really do care. I highly recommend them.
Andre Claassen
Andre Claassen
10:24 08 Jun 23
Prompt, professional and personal service!!
Palabadi Ramaphoko
Palabadi Ramaphoko
19:38 15 May 23
I'm impressed with the work you do. You are extremely professional and polite. I hope we will grow big together!
Deidre Oosthuysen
Deidre Oosthuysen
12:20 04 May 23
I feel as though Thrive CFO is a natural part of our business. 100% professional. Very knowledgeable. Incredibly organised. And with a work ethic and proactive communication practices, I know I am in the very best hands possible.
Sean Fabian
Sean Fabian
07:45 04 May 23
As someone who has had the pleasure of working with Thrive CFO, I can confidently say that they are an exceptional company with an unwavering dedication to their clients. From beginning to end, their commitment to providing top-tier financial services is evident in every interaction.One of the things that sets Thrive CFO apart is their focus on education. They take the time to educate their clients on financial best practices and help them understand the reasoning behind their recommendations. This approach ensures that clients are empowered to make informed decisions about their finances.Thrive CFO also uses the latest technology to streamline their services and make the financial management process as efficient as possible. They utilize cloud-based software to provide real-time financial data and make it easy for clients to access their financial information at any time.Overall, Thrive CFO is an exceptional company that is dedicated to providing personalised financial solutions that help their clients succeed. If you're looking for a financial firm that truly cares about your success, I highly recommend Thrive CFO.
Michael Dawson
Michael Dawson
15:48 02 May 23
Great experience with the team! Always willing to assist with questions and able to help guide my small business to ensure that I am compliant.
Riaan Schlebusch ITMC
Riaan Schlebusch ITMC
12:15 21 Apr 23
Professional, smart and friendly people.You only deal with the best of the best, and they know how to answer your questions, and they ensure that they understand you, and make they make sure to take the time to know your business.
See All Reviews

Ready To Take Your Financial Success To New Heights?

Scroll to Top