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Track Your Key Performance Indicators

May 15, 2017

How well is your business doing? What do you measure to determine this? What do you do with the information? Key performance Indicators (KPIs) are the statistics you track to determine how your business is doing.

If you’ve been running your business for a long time, you have developed your own KPIs, even if on an informal basis. Yet, there is merit to formalizing your KPIs and setting up a system to measure and report them on a regular basis.

Determine Your KPIs
You have to start by developing a list of your KPIs. There are KPIs that apply to all businesses and those that vary based on company. As you are coming up with the ones that apply to you, consider the following as ways to measure success:

  • Net Profit. This is the most common KPI people consider and it’s important. Be sure to look at the components of net profit including sales, cost of goods sold and operating expenses, too.
  • Sales. You should track sales constantly; often on a daily basis with week-to-date, month-to-date and year-to-date information. You will get the most value by comparing the numbers against both your budget and prior periods.
  • Cash. As the saying goes, “cash is king.” You’ll want to track your cash balances, your accounts receivable and your collections. Likewise, you will want to keep track of your payables. The following is a simple format you can use to track cash. Based on the accounting software you use, you may be able to have this information calculated for you automatically. Be sure to use this at least once a week and preferably more often.
  Cash Accounts Receivable Accounts Payable
Start of Day  $10,000  $100,000  $80,000
Sales    8,000  
Collections  5,000  (5,000)  
Purchases      4,000
Disbursements  (13,000)    (13,000)
End of the Day $2,000 $103,000 $71,000
  • Industry-Specific. Many KPIs vary by industry. You need to understand what these measurements are and add them to the list of numbers you calculate and review.

Use a Flash Report
Your KPIs should be compiled and distributed to everyone on your team. The document is often called a flash report because that data should come out “in a flash.” It’s also referred to by other names like dashboard and scorecard, and it’s simply a way to measure your performance at a glance. Frequency varies, but many companies look at their KPIs on a daily basis.

As you develop your flash report, consider adding the following:

  • Sales
  • Number of sales transactions
  • Average sales transaction
  • Cost of goods sold
  • Gross margin percentage
  • Number of new customers
  • Average sales per team member
  • Average labor cost per team member
  • Average labor costs per percentage of sales
  • Sales for day of week
  • Industry-specific KPIs

With the use of technology, it’s become commonplace to compile and share this information digitally, often via a webpage like an Intranet. The key is communicating useful information and making it easily accessible to the team members who can influence the results.

Get Help Measuring and Analyzing Your KPIs. You will find that meaningful data is quite useful to the success of your business. We can help you put operational and financial KPIs into place. Contact us to learn how.

   

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