Key performance indicators (KPIs) are the statistics you track to determine how well your business is doing. If you’ve been running your business for a long time, you will probably have developed your own KPIs, even if only on an informal basis. We think there’s merit in formalising your KPIs and setting up a system to measure and report them on a regular basis; in fact, many companies do them daily.
The first KPI we usually think of is net profit and its components: sales, cost of products and/or services sold and operating expenses. While this information is certainly interesting, it’s not much help in running the business. The information is historical and may not be available until long after the measurement period.
So let’s look at some alternative KPIs:
We need to track sales constantly. In most enterprises, sales should be tracked on a daily basis with week-to-date, month-to-date and year-to-date information. The main value derives from comparing your sales against budget and prior periods.
“Cash is King”, so you will want to track your cash balances, your accounts receivable and your collections. You will also want to keep track of your payables.
Here are some KPIs that are applicable to most businesses; please remember that
KPIs are generally specific to a particular business or industry:
1. Sales Revenue
2. Number of Sales Transactions
3. Number of New Customers
Distribute your KPI information to everyone on the team. The above are “typical” KPIs for most businesses. What are some KPIs specific to your business and industry?
Developing KPIs can be fun and we would be pleased to assist you. If you would like assistance with with setting targets, forecasts and budgets please call us on 01865 582064 or contact us here.