Key Performance Indicators (KPIs) are critical for measuring how a business is performing. Done right, these indicators help spot warning signs early and highlight areas for further growth. But, in order to get the most from them, it’s important to have the right approach.
The first step is to get clear on what key metrics mean for your business and how each can be measured effectively. In this way, you’ll create a story with numbers that you can use to persuade others within your organization about your particular strategy or course of action—and more time spent aligning expectations within teams frees up time for improving your KPIs.
The second step is to get the right data and a process to understand it. As an example, let’s say you want to measure how much payroll is costing you compared to how much your business is making (revenue). While balancing hiring new employees (and making sure they are sufficiently utilized) can be tricky, the payroll as a percentage of revenue value should remain fairly consistent.
Enter in the need to manage this KPI.
To do this effectively, you’ll need a way of tracking your sales (our financial software is QuickBooks Online) and possibly adding some sort of additional management software solution that allows you to easily understand and visualize your numbers.
It’s also important to add that when using KPIs to measure the performance of a business, use the right measures in your KPI framework:
Putting in place a set of KPIs allows your business to see how it is functioning, providing you with a high-level overview to see whether the performance is in line with expectations. This also allows for benchmarking against industry standards and other areas.
You may be familiar with the phrase, “Garbage in, garbage out.” Well at Accountix, we take a much more optimistic view of the situation, and we like to say, “Good numbers in, informed decisions out.”
This is because we believe that good numbers are the foundation of a good business. Without knowing what you are measuring, how can you possibly know if your goals are being met? And without knowing what your goals should be, how can you tell if they have been achieved?
While there is no one-size-fits-all solution for tracking KPIs, there is always a good solution to be found.
We’re here to help.