The essential KPIs for measuring your company's profitability at the end of the first half

One half-year is enough to know how your year will end (if you know what to measure)

Introduction

Many companies wait until December to analyse whether the year has gone well. That's a mistake.

By the halfway point of the financial year there is already enough information to see whether the company is on track to meet its targets or needs to make significant changes. Whether your business concentrates its sales in a few months or invoices evenly throughout the year, six months provide a sufficiently representative sample to make decisions.

The difference between companies that react and those that simply wait usually lies in the indicators they analyse.

The essential accounting KPIs

1. Revenue trend

Comparing sales with the previous year isn't enough. You should analyse:

• • • Cumulative revenue.
    • Real growth, after discounting inflation or price increases.
    • Progress against the annual budget.

2. Gross margin

Selling more doesn't always mean earning more.

Gross margin shows whether higher sales are really generating profit or simply more work for less return.

3. Overheads

Comparing fixed costs with the budget lets you spot deviations before it's too late.

Pay special attention to:

• • • Staff.
    • Vehicles.
    • Energy.
    • Rent.
    • External services.

4. Operating profit (EBITDA or operating income)

This is probably the indicator that best sums up the health of the business.

If after six months profit is well below the annual target, you should act immediately.

5. Cash position

A profitable company can still run into trouble.

You need to keep track of:

• • • Available balance.
    • Outstanding receivables.
    • Upcoming payments.
    • Financing needs.

The sales KPIs that really matter

1. Active customers

How many customers have actually bought from you during these six months?

Many companies discover that they depend on fewer and fewer customers.

2. New customer acquisition

It's not only how much you sell that matters.

How many new customers you win each month matters too.

3. Average order value

If the number of orders holds steady but the average value falls, there is probably a positioning problem or competitive pressure.

4. Purchase frequency

Especially important in distribution.

Are your customers buying as often as they were a year ago?

5. Profitability per customer

Not all customers contribute the same profit.

Looking only at revenue can hide unprofitable customers, due to discounts, incidents or logistics costs.

6. Sales conversion

For companies with a sales department, it's essential to know:

• • • visits made;
    • quotes sent;
    • closing rate;
    • average time to sale.

What if your business is seasonal?

For seasonal businesses, the half-year review is even more important.

If your peak season is already behind you, you can probably estimate the annual result quite accurately.

If the high season is still to come, the first half tells you whether the company is arriving prepared, with enough liquidity, stock, staff and sales capacity.

The key isn't measuring more, but measuring better

One of the most common mistakes is producing dozens of reports that nobody uses.

A small selection of well-interpreted indicators leads to far better decisions than a dashboard full of irrelevant data.

Because the purpose of a KPI isn't to describe the past, but to help change the future.

The half-year isn't a pause in the calendar. It's the best moment of the year to decide how you want to reach December. If the numbers are on your side, you can accelerate. If they aren't, you still have six months to correct course. Waiting until the year-end close to discover problems is almost always the most expensive decision.