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  • 5 Accounting Metrics Every Small Business Owner Should Track (Beyond Just Profit)

    5 Accounting Metrics Every Small Business Owner Should Track (Beyond Just Profit)

    When you ask a small business owner how things are going, the most common answer is:

    “We’re making a profit“. And while profit is important, it’s only one piece of the financial puzzle.

    Many businesses that look profitable on paper still struggle to pay bills, miss payroll, or even close their doors because they weren’t watching the right financial signals. In fact, poor financial visibility is one of the main reasons small businesses fail.

    The good news? You don’t need to be a CPA to understand the numbers that matter most. By focusing on a handful of key accounting metrics, you can spot risks early, make better decisions, and build a stronger foundation for growth.

    Let’s explore five accounting metrics every small business owner should track—beyond just profit.

    1. Cash Flow

    What It Is

    Cash flow is the net movement of money in and out of your business. Positive cash flow means you have more money coming in than going out; negative cash flow means the opposite.

    Unlike profit, which can be tied up in unpaid invoices or unsold inventory, cash flow shows what’s actually in your bank account and available to spend.

    Why It Matters

    • A business can be profitable on paper but still collapse if it can’t pay suppliers, employees, or rent.
    • Cash flow provides a reality check: are you actually liquid, or is your money stuck in receivables and stock?
    • Strong cash flow means you can reinvest in growth, handle unexpected expenses, or simply sleep better at night.

    Example

    Imagine a café that reports a $5,000 monthly profit. Sounds great, right? But here’s the problem: half of the café’s customers order catering services on account and pay 60 days later. Meanwhile, the café has to buy ingredients and pay staff weekly.

    On paper, there’s profit. In practice, the café is struggling to keep the lights on because the cash isn’t in hand yet.

    How Chaika Helps

    Modern accounting software, such as Chaika, can:

    • Show daily, weekly, or monthly cash flow reports.
    • Forecast future cash needs based on historical data.
    • Alert you when outflows (like bills or payroll) will exceed inflows.

    Instead of waiting for a crisis, you can see cash problems coming and plan ahead.

    2. Accounts Receivable Turnover

    What It Is

    Accounts receivable turnover measures how efficiently your business collects money owed by customers. It tells you how fast you’re turning invoices into cash.

    Formula:

    Accounts Receivable Turnover = Net Credit Sales ÷ Average Accounts Receivable

    Why It Matters

    • If customers take too long to pay, your cash flow suffers.
    • A low turnover ratio may mean your credit terms are too generous or your collection process is weak.
    • A high turnover ratio indicates you’re collecting quickly—good news for cash flow.

    Example

    A small consulting firm does $50,000 in credit sales in a quarter. But at the end of that quarter, $40,000 is still unpaid.

    That means the receivable turnover is very low—clients aren’t paying on time, and the firm is essentially financing their projects without being compensated. Even though sales look strong, the firm may have to borrow money just to cover expenses.

    How Chaika Helps

    Let see how could help you with this metric:

    • Track invoice due dates and flag overdue accounts.
    • Send automated payment reminders to clients.
    • Offer online payment links so clients can pay faster.
    • Show receivable aging reports (e.g., how much is overdue by 30, 60, 90 days).

    Instead of manually chasing invoices, you stay in control and reduce payment delays.

    3. Gross Margin

    What It Is

    Gross margin measures the percentage of revenue left after deducting the cost of goods sold (COGS). In simple terms: How much of each sale is left over after covering direct costs?

    Formula:

    Gross Margin = (Revenue – COGS) ÷ Revenue × 100

    Why It Matters

    • High sales don’t always equal high profits—margins matter.
    • If your gross margin is shrinking, it could signal rising costs, pricing problems, or inefficiency.
    • Comparing margins across products or services helps you identify what’s most profitable.

    Example

    A boutique sells handbags for $100 each. Each bag costs $70 from the supplier.

    • Revenue = $100
    • COGS = $70
    • Gross Margin = ($100 – $70) ÷ $100 = 30%

    That 30% margin must cover rent, staff, marketing, and other overhead costs. If margins drop to 20% because of rising supplier prices, the business may struggle even if sales volume stays the same.

    How Chaika Helps

    • Tracks cost and revenue by product or category.
    • Provides real-time gross margin reports.
    • Flags products that are consistently underperforming.

    This makes it easier to adjust pricing, negotiate with suppliers, or focus on high-margin items.

    4. Break-Even Point

    What It Is

    The break-even point is the level of sales at which total revenue equals total costs. At this point, you’re not making a profit, but you’re not losing money either.

    Formula:

    Break-Even Point = Fixed Costs ÷ (Price per Unit – Variable Cost per Unit)

    Why It Matters

    • Tells you how much you need to sell to cover your expenses.
    • Helps set sales targets and pricing strategies.
    • Crucial for startups and seasonal businesses to plan realistically.

    Example

    A bakery has fixed monthly costs of $10,000 (rent, salaries, utilities). Each cupcake sells for $5, with a variable cost of $2 (ingredients, packaging).

    Break-Even = $10,000 ÷ ($5 – $2) = 3,333 cupcakes

    The bakery must sell 3,333 cupcakes per month just to cover costs. Anything above that generates profit.

    How Chaika Helps

    • Automates break-even analysis.
    • Lets you test “what if” scenarios (e.g., what if rent increases 10%, or ingredients get cheaper?).
    • Helps you make smarter pricing decisions.

    Instead of guessing, you know exactly what sales volume you need to survive and thrive.

    5. Net Working Capital

    What It Is

    Net working capital measures your short-term financial health. It’s the difference between current assets (cash, receivables, inventory) and current liabilities (bills, short-term debt).

    Formula:

    Net Working Capital = Current Assets – Current Liabilities

    Why It Matters

    • Positive working capital means you can cover your short-term obligations comfortably.
    • Negative working capital suggests you may struggle to pay suppliers or meet payroll.
    • It’s one of the first things investors or lenders check.

    Example

    A small retailer has:

    • Current Assets: $30,000 (cash, inventory, receivables)
    • Current Liabilities: $40,000 (loans due, accounts payable)

    Net Working Capital = $30,000 – $40,000 = –$10,000

    Even though sales look good, the retailer is stretched thin and may need to delay supplier payments or borrow money.

    How Chaika Helps

    • Provides a real-time view of assets vs liabilities.
    • Consolidates all bills, debts, and receivables in one dashboard.
    • Generates alerts when liabilities are about to exceed assets.

    This helps you stay proactive and avoid cash crunches.

    Conclusion

    Profit is important, but it doesn’t tell the whole story. To truly understand the health of your business, you need to go beyond the bottom line and track:

    1. Cash Flow – to ensure liquidity.
    2. Accounts Receivable Turnover – to keep money moving.
    3. Gross Margin – to measure efficiency and pricing power.
    4. Break-Even Point – to set realistic sales targets.
    5. Net Working Capital – to maintain short-term stability.

    The best part? With the right accounting software, such as Chaika, tracking these metrics doesn’t require advanced math or endless spreadsheets. Dashboards, automated reports, and real-time alerts mean you always know where your business stands—without waiting for year-end reports.

    By monitoring these five metrics, you’ll make smarter decisions, spot risks before they become problems, and build a stronger foundation for long-term growth.

    Because at the end of the day, business success isn’t just about profit—it’s about financial clarity.

  • Why Spreadsheets Fall Short for Business Accounting

    Why Spreadsheets Fall Short for Business Accounting

    Spreadsheets are like duct tape: versatile, cheap, and surprisingly effective in a pinch. Many small and medium-sized businesses start out tracking their finances in Excel or Google Sheets because it feels familiar. You can create a simple table for expenses, another for income, and maybe even add some formulas to calculate totals.

    But as your business grows, what once worked as a convenient solution turns into a liability. Numbers stop matching up, different versions of files circulate in emails, and you spend more time fixing formulas than running your company. In accounting, where accuracy and clarity are everything, spreadsheets simply don’t measure up.

    The good news? You don’t need a massive enterprise system to break free from spreadsheet chaos. Even the simplest double-entry accounting software offers massive improvements—especially in areas like multi-currency support, account organization, reporting, collaboration, and security. Let’s explore why.

    1. The Comfort and the Trap of Spreadsheets

    It’s easy to see why so many SMEs default to spreadsheets:

    • They cost little or nothing.
    • Everyone already knows how to use them.
    • You can create a custom system from scratch.

    At first, this flexibility feels liberating. But it’s also a trap. Because spreadsheets aren’t designed for accounting, they rely entirely on your manual discipline. Forget to enter one line? The numbers are wrong. Break a formula? The totals collapse. Spreadsheets don’t know the difference between a debit and a credit, or between income and a liability.

    Accounting software, such as Chaika, on the other hand, is built with guardrails. Every entry is double-checked against accounting logic, ensuring your books always balance. Instead of being a fragile DIY system, it becomes a reliable foundation for decision-making.

    2. The Hidden Risks of Spreadsheet Accounting

    a. Error-Prone Data Entry

    Spreadsheets are notorious for errors. A misplaced decimal or broken formula can change your profit by thousands without you noticing. And because spreadsheets lack automatic checks, these errors often hide until it’s too late.

    Imagine you typed “10000” instead of “1000” for office rent. Your spreadsheet happily accepts the number, showing your profit plummet. A proper accounting system would flag the entry as suspicious or allow you to compare against previous months instantly.

    b. No Built-In Double-Entry Control

    Double-entry bookkeeping is the gold standard in accounting because it ensures every transaction balances: every debit has a credit. In spreadsheets, nothing forces you to follow this rule. It’s far too easy to record only one side of a transaction—or misclassify it entirely—leaving your reports unreliable.

    c. No Audit Trail

    Spreadsheets don’t track who made changes or when. If a number suddenly changes, there’s no way to know whether it was a mistake or intentional. This lack of accountability creates risk, especially when multiple people handle the books.

    3. Where Software Shines Compared to Spreadsheets

    3.1 Multi-Currency Support

    In today’s global economy, even small businesses deal with multiple currencies—selling abroad, paying overseas suppliers, or managing freelancers.

    • Spreadsheets: require manual entry of exchange rates, manual conversions, and often inconsistent results.
    • Accounting software: updates exchange rates automatically, converts transactions into your base currency, and allows you to report in multiple currencies without extra work.

    Example: An online retailer sells in USD, EUR, and CNY. In a spreadsheet, tracking exchange differences would be a nightmare. In accounting software, each transaction is logged in the original currency and converted into the home currency automatically.

    3.2 Organized Chart of Accounts

    Spreadsheets are essentially flat tables. You might create tabs like “Expenses” and “Revenue,” but categories quickly become inconsistent. One person might call something “Ads,” another “Marketing,” and another “Promotions.”

    Accounting software uses a structured chart of accounts that keeps everything consistent: assets, liabilities, equity, revenue, and expenses are clearly organized. Sub-accounts allow you to drill down without losing the big picture.

    Example: Instead of dozens of random expense lines, all advertising costs fall neatly under “Marketing & Advertising.” Your income statement stays clear, and you can still see the details when needed.

    3.3 Reporting and Insights

    With spreadsheets, reporting means building custom pivot tables or formulas every time you want to see your financial health. It’s slow, fragile, and prone to errors.

    Accounting software, by contrast, generates ready-to-use reports instantly:

    • Income Statement (Profit & Loss)
    • Balance Sheet
    • Cash Flow Statement
    • Tax summaries
    • Trend analysis dashboards

    These aren’t just totals—they’re actionable insights. You can see which expenses are growing, how cash flow compares month-to-month, or how much revenue comes from different services.

    Example: In two clicks, you could generate a year-to-date P&L and export it to share with your bank. Try doing that reliably with raw spreadsheets.

    4. Collaboration in the Cloud

    One of the biggest limitations of spreadsheets is collaboration. Sending files back and forth means multiple versions, lost edits, and endless confusion. Even cloud spreadsheets like Google Sheets aren’t designed for accounting—they lack controls for roles, permissions, or financial workflows.

    Modern cloud accounting software solves this with:

    • Multi-tenancy: One account can host multiple businesses or organizations. Perfect if you run more than one company.
    • Role-based access: The owner can see everything, while bookkeepers can post transactions, and sales managers can only view revenue reports.
    • Real-time collaboration: Everyone works on the same data, without overwriting each other.

    And because these tools are cloud-based, they’re accessible anywhere, anytime—on desktop, tablet, or mobile. That means you can check your latest numbers during a client meeting or approve an expense while traveling.

    5. Security and Data Availability

    Spreadsheets stored on a local computer are vulnerable. A laptop crash, accidental deletion, or stolen device could mean losing years of financial data. Even with backups, file versions often get out of sync.

    Accounting software enhances security and availability by:

    • Storing data in the cloud with automatic backups.
    • Encrypting sensitive information.
    • Offering secure logins with two-factor authentication.
    • Ensuring you can access your data from any device—desktop or mobile.

    For SMEs, this peace of mind is invaluable. Your books are always safe, always available, and always up to date.

    6. The Middle Path: Why Accounting Applications Beat Excel

    Some business owners hesitate, thinking accounting software like Chaika must be complicated or expensive. The truth? Double-entry accounting apps provide a huge leap forward over spreadsheets:

    • Automatic balancing of books (debit = credit).
    • Organized chart of accounts.
    • Reliable reporting without formulas.
    • Multi-currency support.
    • Cloud access with collaboration and security built-in.

    It’s not about replacing spreadsheets everywhere—they still shine for budgeting or forecasts. But for accounting, dedicated software, such as Chaika, is the safer, smarter choice.

    Conclusion

    Spreadsheets are great for many things, but accounting isn’t one of them. They’re fragile, error-prone, and lack the structure businesses need to make confident decisions. Modern accounting applications like Chaika remove those risks while giving you clarity, automation, and collaboration tools that spreadsheets could never deliver.

    If you’re still running your books in Excel, now is the time to step up. The usage of Chaika can transform the way you manage money: fewer errors, faster reports, safer data, and more time to focus on growing your business.

  • Making Sense of Debits and Credits Without Being an Accountant

    Making Sense of Debits and Credits Without Being an Accountant

    If you’re a small business owner, freelancer, or startup founder, chances are you’ve opened your accounting reports at least once and thought:

    “Debits? Credits? Why does this feel like a secret language?”

    You’re not alone. For many people, accounting terminology is intimidating. “Debit” sounds like “money going out,” and “credit” feels like “money coming in”—but then your accountant tells you something entirely different, and suddenly none of that makes sense to you.

    But here’s the good news: debits and credits would not appear that complicated to you once you understand the logic behind them. And there is even better news: with the right accounting application, such as Chaika, you don’t have to manually record them most of the time. However, it is still important to have some knowledge about these concepts: it will help you trust your financial reports, communicate with your accountant confidently, and spot errors before they turn into headaches.

    In this post, we’ll break down debits and credits in simple language, show you real-world examples, and explain how accounting software makes them almost invisible—while keeping your books balanced and audit-ready.

    What Are Debits and Credits—Really?

    Let’s start with the basics: in the world of accounting, debits and credits are not the same thing as money moving in and out of your bank account. Rather, they represent the two sides of every financial transaction. We can assume that the transaction in this context is an economic event that accountants record.

    Debits and credits are the foundation of double entry accounting. Think of that as the rule of balance in accounting. Every time money moves, something must go up and something must go down. Debits and credits are the way we keep track of that balance.

    • A debit is an entry on the left side of an account.
    • A credit is an entry on the right side of an account.

    To put it simply, debits and credits represent balanced items. Double entry accounting gives you an important advantage over single entry accounting: you always can assert the correctness of your accounting by the fact that the total amount of your debit entries should be equal to the total amount of your credit entries.

    The financial operation is made up of two sides, and when we make a change on the left side, we refer to debiting the account. In a similar manner, changes on the right side are known as crediting the account.

    The Five Account Types: The Key to Understanding

    Now, we have an understanding of these two sides. Just to remember: debits don’t always mean “decrease,” and credits don’t always mean “increase”. Actually, whether a debit increases or decreases something depends on the type of account.

    The table below demonstrates the five basic account categories in accounting, along with how debits and credits affect them:

    Account typeIncreased byDecreased by
    Assets (things you own)DebitCredit
    Liabilities (debts you owe)CreditDebit
    Equity (owner’s interest)CreditDebit
    Revenue (income earned)CreditDebit
    Expenses (costs you pay)DebitCredit

    This small table summarizes how both sides of the operation are affected depending on the type of account.

    Real-World Examples

    Now, let’s take a look at several concrete examples you might recognize from running your business.

    Example 1: Buying software with cash

    Let start with a simple situation. Imagine that you purchase a yearly subscription to a CRM application for $100. How can we represent this transaction using the double entry rule? Let’s operate two accounts (one for expense and one for asset):

    • Debit: Software Expense $100 (because expenses increase with debits)
    • Credit: Cash $100 (because your cash asset decreases with a credit)

    So now your accountant can say, “We spent money on a CRM app, and we now have $100 less in the bank.”

    Example 2: Sending an invoice to a client

    Another example. Suppose you successfully complete a project and just send an invoice for $500 to the customer. This operation employs asset and income accounts:

    • Debit: Accounts Receivable $500 (an asset—your customer owes you money)
    • Credit: Revenue $500 (income goes up with credits)

    Just remember: even though you haven’t been paid yet, you’ve earned revenue. That’s why you record both the receivable and the income.

    Example 3: Receiving payment from the client

    Now, the customer pays you that $500 invoice. How will this impact your bookkeeping?

    • Debit: Cash $500 (asset increases with a debit)
    • Credit: Accounts Receivable $500 (the customer’s debt decreases with a credit)

    Now your receivable is cleared, and the cash is in your account.

    Example 4: Taking out a loan

    Imagine that you borrow $1,000 from a bank. Again, this business event can be represented using two corresponding accounts: asset and liability.

    • Debit: Cash $1,000 (you now have more money in your bank account)
    • Credit: Loan Payable $1,000 (a liability—you owe the bank)

    Notice that the cash goes up, but so does your debt. In other words, this transaction is perfectly balanced!

    Example 5: Paying employee salaries

    Finally, suppose that you pay your employee a salary of $2,000. To register this accurately in our books, we need to declare both expense and asset accounts that are involved:

    • Debit: Salary Expense $2,000 (expenses increase with debits)
    • Credit: Cash/Bank $2,000 (your asset decreases)

    It shows that money went out, but it went to an expense that reflects the cost of doing business.

    To sum up, every business transaction has at least two sides in double-entry accounting. And this rule is the foundation of financial reporting. It ensures that everything always balances, like puzzle pieces fitting together.

    Why the Terminology Trips People Up

    A big reason business owners and managers are confused is because the terms “debit” and “credit” are also used in everyday life with different meanings.

    At the bank, “debit card” means money leaves your account. On your credit card, “credit” means you have a spending limit.

    But in accounting, the terms are neutral—they’re just sides of the ledger. Their effect depends on the type of account.

    That’s why accounting software like Chaika is so helpful: it translates accounting jargon into plain actions. You don’t have to think, “Should I debit or credit this?” Instead, you just press: “Record expense” or “Send invoice”, and the system does the double-entry for you.

    The Bigger Picture: Why Debits and Credits Matter

    It might feel like debits and credits are just details, but they’re the foundation of every financial statement you’ll ever need:

    • Balance Sheet: Shows your assets, liabilities, and equity.
    • Income Statement: Shows your revenue and expenses.
    • Cash Flow Statement: Shows how money moves in and out of your business.

    Without proper debits and credits, these reports wouldn’t balance. And without accurate reports, you can’t make confident business decisions—or convince investors, lenders, or partners that your numbers are trustworthy.

    Final Thoughts

    Debits and credits aren’t as scary as they sound. They’re simply the mechanics who keep your financial records balanced. Once you understand that:

    • Assets and expenses grow with debits
    • Liabilities, equity, and revenue grow with credits

    …you can see how every transaction fits into the bigger financial picture.

    But here’s the best part: you don’t need to manually record debits and credits every day. Modern accounting software like Chaika takes care of that automatically—leaving you free to focus on running your business.

    So the next time someone mentions debits and credits, you won’t panic. You’ll nod, smile, and think:

    “I know what that means—and Chaika has it covered.”

    References

    Taylor, P. (2003). Book-keeping & Accounting for the Small Business. 7th ed.

    Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2015). Accounting Principles. 12th ed. Wiley