February 13, 2026
Tracking financial KPIs is particularly important for small to medium-sized businesses, giving them the focus and insights to not only better navigate uncertain times, but also drive those initiatives that lead to operational efficiency, improve their liquidity and increase growth. Financial KPIs also support strategic decision‑making by showing your progress toward financial goals, revealing how initiatives and business units are performing, and highlighting areas that need improvement.
In this guide, we’ll explain why these financial KPIs are so important in 2026 and share the most critical ones that your business needs to know. We also detail the benefits of tracking these metrics, what to consider when choosing KPIs, and how financial KPI dashboards and tools can help make the process easy.
Financial KPIs are quantifiable metrics that help your business monitor overall performance and progress toward financial goals. They provide insight into profitability, liquidity, efficiency, solvency, and growth. These measurements support informed decision‑making, strategic alignment, early issue detection, and identifying opportunities for improvement.
Financial KPIs also give you a clearer picture of your data by showing relationships between metrics. For example, net profit margin reveals how much revenue remains as profit after all expenses.
As good practice, analysing financial KPIs across different periods helps you spot trends over time, while comparing them against industry benchmarks shows how your business performs relative to competitors.
Your business generates a seemingly overwhelming amount of financial data, but financial KPIs help turn this information into a manageable set of critical indicators. By distilling complex data into clear, actionable insights, it can help you make better decisions, focus on areas for improvement, and leverage your business’s strengths.
KPIs help you gain insights into specific areas of financial performance, such as your business profitability, liquidity, efficiency, solvency, and growth. Let’s look at some financial KPI examples for each of these categories to give you a sense of the insight they provide.
Profitability metrics measure how efficiently a company generates profit.
Three of the most popular profitability KPIs for businesses include:
This ratio measures the profitability of your business’ core operations by showing the percentage of revenue that remains after deducting cost of goods sold (COGS). It allows you to gauge how efficiently you’re producing and selling products and services, and how much profit you’re generating before accounting for operating expenses, interest and taxes.
Use the formula below to calculate gross profit margin:
Gross profit margin = Gross profit / Revenue x 100
Net profit margin measures the percentage of revenue that remains as profit after all expenses are deducted, including operating expenses, interest and taxes. It indicates how efficiently your business is converting revenue into actual profit and its ability to control expenses.
Use the formula below to calculate net profit margin:
Net profit margin = Net income / Revenue × 100
This is a widely used financial KPI that measures the profitability of an investment or project relative to its cost. Expressed as a percentage, ROI shows how efficiently your business is using its resources to generate returns.
Use the formula below to calculate ROI:
ROI = (Net profit from investment - Cost of investment) / Cost of investment x 100
Liquidity ratios assess your business’s ability to meet short-term obligations, ensuring it can cover its debts as they come due. Two of the most widely used are:
The current ratio measures your business’s short‑term liquidity by comparing total current assets to total current liabilities. A higher ratio indicates a stronger buffer between what you owe and what you can quickly convert into cash. As a general guideline, a current ratio of 2 or more suggests good short‑term financial strength, meaning your current assets are at least double your current liabilities.
Use the formula below to calculate the current ratio:
Current ratio = Total current assets / Total current liabilities
The quick ratio provides a more immediate measure of liquidity by assessing whether your most liquid assets can cover current liabilities. It excludes inventory and other less liquid current assets, focusing instead on cash, cash equivalents, and accounts receivable. A quick ratio of 1:1 or higher is generally considered safe, indicating you can meet short‑term obligations without relying on inventory sales.
Use the formula below to calculate the quick ratio:
Quick ratio = (Cash and equivalents + Accounts receivable) / Total current liabilities
Efficiency ratios evaluate how effectively your business uses its assets and manages its operations. Two key efficiency ratios to consider adopting include:
This ratio indicates the efficiency with which your business is managing inventory by measuring how often it’s sold or replaced in each period. A lower turnover rate can indicate you’re purchasing too much stock or that sales are low, while a higher ratio indicates you’re effectively minimising slow-moving or obsolete stock.
Use the formula below to calculate inventory turnover:
Inventory turnover = COGS / Average inventory balance for period
Accounts receivable turnover shows how quickly your business collects payments from customers. By calculating the number of times accounts receivable are converted into cash for a given period, this ratio indicates the effectiveness of your collection policies, credit terms and billing practices.
Use the formula below to calculate accounts receivable turnover:
Accounts receivable turnover = Sales on account / Average accounts receivable balance for period
Solvency ratios measure your business’s ability to meet debt obligations and sustain operations over the long term. Two popular solvency ratios among businesses include:
The debt‑to‑equity ratio measures the proportion of funds financed through debt versus owner‑supplied equity. It helps you understand how the business is funding its assets and whether the current balance between debt and equity is sustainable. The ideal mix varies across industries, but maintaining an appropriate ratio ensures long‑term financial stability. Improving this ratio often involves retaining profits rather than relying on additional borrowing.
Use the formula below to calculate the debt-to-equity ratio:
Debt to equity ratio = Total debt / Total equity x 100
The interest coverage ratio indicates your business’ risk of defaulting on its debt. It measures your ability to pay interest on debt like loans and bonds, measuring the ratio of operating profit to interest expense. A higher ratio means you are in a better position to service debt.
Use the formula below to calculate the interest coverage ratio:
Interest coverage = Earnings before interest and tax / Interest expense
Growth metrics track your business’s expansion over time. Let's look at two commonly used ratios that provide visibility of growth:
Typically calculated quarterly or annually, this measures the percentage increase or decrease in your business’s total revenue for a given period. It can indicate the effectiveness of your sales and marketing strategies, as well as the demand for your products and services.
Use the formula below to calculate the revenue growth rate:
Revenue growth rate = (revenue in current period − revenue in previous period) / revenue in previous period x 100
Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) measures earnings from core operations by removing the impact of non‑cash expenses such as depreciation and amortisation. It provides a clearer view of operational cash flow relative to revenue and helps indicate how efficiently the business is generating profit from its core activities.
Use the formula below to calculate EBITDA:
EBITDA= Net income + Interest + Taxes + Depreciation + Amortisation
Effective KPI tracking requires selecting the right metrics, using the right tools and integrating tracking into regular business processes.
Let’s look at what you should consider when choosing KPIs and how technology can help make tracking easier.
Choosing the right financial KPIs can feel overwhelming, but the key is to focus on those that best support your business goals.
Some KPIs, like net profit margin and gross profit margin, are widely used across most industries. Others are more specialised and useful only when aligned to specific objectives. For example, if your focus is growth, KPIs such as revenue growth rate and EBITDA are appropriate. If improving efficiency is the priority, metrics like inventory days and accounts receivable days provide clearer insight.
Other factors you may want to consider when selecting KPIs include:
Modern cloud‑based software can significantly reduce the time and effort required to monitor key business metrics. Solutions like Fathom offer financial KPI dashboards that make it easy to measure, understand and improve performance.
With more than 50 built‑in financial KPIs and the option to create custom metrics, Fathom lets you track the KPIs most relevant to your business. Key features include daily syncing with online accounting systems, comprehensive KPI scorecards, and tools to set and monitor targets. You can also consolidate and benchmark results across multiple companies, assign importance levels to each KPI, and view performance for any chosen period.
Fathom also integrates seamlessly with leading accounting platforms like Xero, QuickBooks and MYOB, making it simple to connect and get more out of your data.
Watch the video to discover more about tracking financial KPIs in Fathom:
KPIs are a valuable tool for evaluating business performance, but to truly get the most value from them, understanding the story behind the numbers is essential.
It’s important not to take KPIs at face value and to understand the context behind the figures. For instance, a KPI showing a decline in revenue might be due to a one-time event, such as a major client delaying payment until the next quarter. This kind of drop is not necessarily due to a failure in your sales strategy.
Another example is a temporary increase in the debt-to-equity ratio. This might occur if you took out a significant loan to fund a new business initiative. Normally, a higher debt-to-equity ratio could signal financial instability, but in this case, it may be expected and should be monitored until the investment begins generating returns.
In short, understanding the story behind each KPI and using your best judgement can help you respond to the right signals rather than react to misleading data points.
Benchmarking your KPIs against industry standards helps gauge your performance relative to competitors. It identifies areas where your business excels and highlights opportunities for improvement.
One place to access industry benchmarks is the Australian Taxation Office (ATO) site, which provides financial ratios of Australian businesses based on their activity statements. The ATO also provides small business benchmarks based on financial ratios across a variety of industries.
You can also compare your KPIs to historical data to identify trends over time. This shows whether performance is improving, declining, or stable, and provides a realistic foundation for setting achievable future targets.
London‑based digital agency Matter of Form used financial KPIs to gain clearer strategic direction and improve team alignment. Being a creative agency, the firm had a specific set of metrics it needed to track.
“Our team understands that by hitting targets and being successful as a business, we can produce our best creative work,” said Chief Operating Officer (COO) Fred Moore.
However, without a financial KPI dashboard, the agency lacked a clear way to track progress and set tangible financial and operational goals.
To determine which KPIs to monitor, the team identified 15 key monthly goals, ultimately grouping them into five financial, five sales, and five operational KPIs.
With Fathom, Matter of Form selected from more than 50 financial KPIs to track profitability, efficiency, cash flow, and growth. They also set KPI targets, assigned importance levels, and used alerts to stay on track, ensuring everyone was “on the same page.”
“Every month Fathom presents a beautifully simple and intuitive visual expression of where we need to be in relation to our business targets,” Moore said.
Matter of Form also used Fathom to monitor non‑financial metrics and create custom formula KPIs tailored to their business.
Fathom’s seamless integration with Xero streamlined their processes, with Moore noting, “The connection with Xero makes it fantastically easy to import data, saving us an awful lot of time.”
Beyond time savings and improved visibility, Fathom also helped bridge the gap between the agency’s creative and financial cultures. As Moore explained, “Fathom provides a bridge between the creative culture and financial culture. It’s genuinely motivating for all our employees.”
Managing financial KPIs comes with its own set of challenges. Let’s look at some of the common pitfalls and how to overcome them to maintain effective KPI tracking.
Understanding and addressing the following challenges is crucial for maintaining the accuracy and usefulness of your performance metrics.
Tracking too many KPIs can lead to information overload and dilute focus on critical performance areas. It’s therefore important to select those KPIs that align with your strategic goals. While there’s no set number of KPIs a business should use, it’s recommended to track between four and 10.
Establishing unattainable KPI targets can demotivate employees and create a culture of failure. Make sure to set realistic and achievable targets based on historical performance and industry benchmarks. Regularly review and adjust targets as needed.
Failing to regularly review and update KPIs can mean that as your business grows and evolves, they may no longer be as relevant and useful. It’s therefore essential to schedule regular KPI reviews so you can adjust to reflect changes in your business’s strategy or market conditions.
Collecting feedback from employees and managers about the effectiveness and relevance of your KPIs can also help keep them up to date, as well as keep tabs on the financial benchmarks typically used in your industry.
Without employee buy-in, KPI initiatives may face resistance within your business. It’s therefore critical to involve employees and other departments in the KPI development process and to communicate how they can contribute to your business’s success.
In 2026, amid an increasingly unpredictable economic environment, tracking financial KPIs remains essential for businesses.
These metrics help you focus on what matters most, such as spotting opportunities, identifying areas for improvement, and addressing risks early. They also reveal how your performance compares with previous periods and industry competitors.
Overall, incorporating financial KPIs into your strategy provides clarity, strengthens decision‑making, and ensures every team and department stays aligned with your financial goals.
Start your free 14‑day Fathom trial and see how quickly you can track the financial and non‑financial KPIs that drive your business forward. With intuitive KPI dashboards and clear visual insights, Fathom makes it simple to set targets, monitor performance, and generate reports that fuel smarter decision‑making.
Explore the full benefits of Fathom on our website, or dive into our blog for tutorials, webinars, and customer stories that show what’s possible.
Kit is the Content Marketing Manager for The Access Group APAC and Fathom. He is a former journalist with extensive experience in content writing and copywriting across various industries, including higher education, not-for-profit, and finance sectors.
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