Using your accounting system to measure KPI
The art of translating financial data into other useful sources of business information is a useful skill that can be used to transform the overall performance of a business. Using financial data to create Key Performance Indicators is now a common business practice.
You may think that your business is either too small or does not require KPI information. The absence of detailed information may well leave your business struggling in the dark.
Here are some monthly KPIs every business should consider monitoring:
• Total number of sales
• Profitability per product
• Marketing expenses
• Staffing costs
• Standard cash flow report
• Debtors' report
• Creditors' report
Analysing this information on an individual basis can provide a wealth of information that can be used to inform business decisions and practice. In short they help to identify standard symptoms that hinder business success.
Two problems that can be avoided by using KPIs.
Making a Loss
Many businesses use KPIs to identify products and services that are consistently making a loss. Measuring production costs vs. their revenues is the only way to assesses whether a profit or a loss is being incurred.
Poor Communication
Analysis of financial information is a good way to create useful communication between individuals in relation to the different elements of a business. Lack of communication between different departments often leads to poor business performance.
KPIs can be a big help in improving business performance. A good accounting system is the first step in producing relevant information.
