Ever wondered why your sales are increasing but your net profit isn’t?  Or you have recently grown the business and have lost sight of some of the performance of the business?  Or perhaps you have your financial reports but can’t see how to improve the bottom line. 

Taking a more detailed, analytical view of your business, measuring and reporting some of the key aspects of your business can provide explanations to such questions.

Key Performance Indicators (KPIs) are the drivers of great businesses.  They measure key areas of the business in the same way your GP carries out a health check (driving better processes).  KPIs can be both financial in nature, such as the gross profit margin, wages % of revenue or return on investment.  They can also be non-financial such as the number of new customers, employee satisfaction or client referrals.  A mix of both financial and non-financial KPIs is required to get a balanced view on how the business is tracking.

How do you know which KPIs to track for your business?  It all starts with your business goal setting.  Once goals are determined, you can set targets.  KPIs are selected to track business performance back to your goals and targets.  The optimum number of KPIs to measure is 5 – 8.  Tracking too many can over-complicate matters and can be counter-productive. 

We have recently implemented new performance management reports for some of our clients that utilises the financial information from Xero and display in meaningful graphical representations.  The reporting platform is provided by Spotlight Reporting (www.spotlightreporting.com).

We are also about to commence using a benchmarking tool (www.ranqx.com) that will allow us to compare your business’s results against industry averages so the business performance is assessed relative to similar businesses.

If you would like some assistance around measuring business performance, benchmarking or goal setting, give us a call.

Written by Dylan Guitry