The 7 financial KPIs every SME should track (and almost none do).

Most Brazilian SMEs operate in the dark. Not from lack of data — there's usually too much. What's lacking is focus: dozens of disconnected reports, spreadsheets nobody reads, dashboards nobody understands. The paradox is that a company's financial health can be monitored with 7 well-chosen KPIs. These are the ones we teach our clients.

1. Contribution margin

The first metric we look at in any company. Shows how much of every revenue dollar remains after paying variable costs — before covering fixed costs and generating profit.

Formula: (Revenue − Variable costs) ÷ Revenue × 100

Why it matters? Because contribution margin finances the entire fixed structure. If it falls, no matter how much expense you cut — your company starts bleeding.

Ideal frequency: monthly, broken down by product or service line.

2. Break-even point

How much you need to bill to cover all costs and expenses — without profit or loss. The "minimum operating threshold".

Formula: Fixed costs ÷ Contribution margin (%)

Companies that don't know their break-even point operate by intuition. In a crisis, they're the first to make wrong decisions.

3. Cash conversion cycle

How many days your money stays trapped in the business between buying raw material/inventory, producing, selling, and receiving.

Formula: Average inventory days + Average receivable days − Average payable days

If positive: you finance your customers. If negative: your suppliers finance you. Premium-grade companies seek negative cycle. That's what Amazon and iFood do.

4. Net working capital

Money available to run day-to-day after paying short-term debt.

Formula: Current assets − Current liabilities

Insufficient working capital is the number-one reason for SME bankruptcies in Brazil. Not lack of sales — lack of money available to operate.

5. EBITDA and EBITDA margin

Earnings before interest, tax, depreciation and amortization. Shows pure operational cash generation — without influence from tax structure or accounting.

EBITDA margin: EBITDA ÷ Net revenue × 100

Most-used KPI by investors and banks. If your company wants to raise, sell or professionalize, EBITDA needs to be on the executive dashboard.

6. Net debt / EBITDA

How many years of current cash generation the company would need to pay all net debt. Measures financial risk.

Formula: (Total debt − Cash) ÷ EBITDA

Banks consider healthy up to 3x. Above 4-5x, the company enters financial stress zone. Above 7x, usually too late.

7. Year-over-year revenue growth

Percentage variation in revenue compared to same period last year. Captures seasonality and shows real trajectory.

Formula: (Current period revenue ÷ Same period prior year − 1) × 100

Looking month over month is misleading for seasonal businesses. Year-over-Year is market standard for evaluating real growth.

How to build the dashboard

The 7 KPIs on a single screen, updated monthly. No pie charts, no 30 graphs. Just:

• Current number for each KPI
• Previous month's number (variation)
• Same month previous year
• The target — when applicable

Useful dashboard fits on one screen. Anything beyond that becomes a report nobody reads.

The most common mistake

Companies start tracking 30+ KPIs simultaneously. In 3 months, they track none. Start with these 7. Master them. Then — and only then — add sector-specific KPIs.

Real monitoring begins when everyone in leadership can look at these 7 numbers and tell the financial story of the month in one sentence.