Findex: Key Performance Indicators – a great tool to help businesses succeed.

Steve Alexander, Partner, Accounting and Business Advisory, Findex.

Key Performance Indicators (KPIs) are measures used to evaluate the success of a business in meeting its objectives.

KPIs are great way to keep track of how your business is performing in real time. Most businesses use annual financial statements, which are predominantly prepared for either statutory reporting or tax purposes.

Because they are backward looking, any insights taken from financial statements may be redundant by the time they’re measured and any issues recognised have more than likely been going on for months without being addressed.

Businesses need more timely information so they can respond quickly to situations as they unfold.

Developing KPIs requires careful thought, including:

1. What are the critical drivers of my business?

a. Sales

b. Margin

c. Referrals/Leads

d. Staff satisfaction/turnover

e. Customer satisfaction

2. How do I measure them without creating a lot more admin work?

3. What does success look like and how do I compare to that?

To be effective, KPIs should be based on data. What you can measure you can manage.

One of the advantages of technological advances in digitisation and accounting software is the ability to pull data from systems and report on it. What was once a very manual process can now be done in minutes. There are many off-the-shelf software applications available to help set and track KPIs (and advice available if you’re unsure).

Sales are the lifeblood of any business. Whilst tracking sales is crucial, it’s also important to understand the drivers and risks, including;

1. Number of new, active and inactive customers by spend. What are the trends?

2. Concentration of sales (for example, with the top 10 customers). What are your plans to mitigate reliance on a few?

3. Sales activity and sale pipeline volumes. Where are we winning new business from? What activities are generating the best outcomes, and why?

4. Customer satisfaction survey data. Are our customers satisfied to the point where they will refer others to us?

5. Quotes won vs quotes provided and reasons for winning/not winning. How are we performing in the market compared to our competitors? What is our point of difference?

KPIs are an important tool to help businesses navigate the day-to-day challenges of being in business. By being on the front foot and making decisions based on real-time data, businesses have a much better chance of success.

To work with an experienced business advisor to review, set, and manage your KPIs visit findex.co.nz