Get free updates - subscribe to our monthly newsletter Subscribe
We see quite a varied approach by businesses when looking at how they measure their success. Different companies will take a different approach in terms of what they measure and the frequency with which they do it, but regardless of size, industry or where you are in your business life-cycle; there are some common Key Performance Indicators (KPIs) which all businesses should be measuring.
It’s also quite easy to focus on one or two KPIs in isolation and forget how that ties into the wider picture of your success. For example, if you are just tracking your income growth and gross profit margins, that’s not going to flag up pinch points in cash flow or how quickly you are turning over your stock. There are also non financial KPIs which should be considered, such as customer satisfaction and complaints.
For small owner managed businesses where owners find themselves tied up in the day-to-day running of the business, it’s quite understandable why their focus might just be on making sure compliance is adhered to at the year end. However, with a few simple changes to how you record, track and report your numbers, it’s amazing how much extra insight into the health of your business you can get.
Good use of KPIs within regular management information will help business owners and managers to improve profitability, take advantage of tax planning opportunities, help with profit extraction decisions, raise finance and keep stakeholders happy.
Cash flow forecast – to help identify shortfalls/large surpluses and allow for planning around that
Gross profit margin – tracking the profits you are making before you deduct your overheads
Earnings Before Interest, Taxes, Depreciation & Amortisation (EBITDA) – focuses on underlying operational profitability, regardless of capital investment
Debtor days – the amount of time it takes you to collect the cash from your customers
Creditor days – the amount of time you are taking to pay your suppliers
The list of KPIs that can be used is vast, and deciding what else you may want to track will need careful consideration based on the specific type, size, structure and industry in which you operate. Most will be centered around growth, profitability, efficiency and liquidity and some are more complicated than others to calculate, so using software to do this is preferable.
Software on the market now is great at tracking KPIs for your business, and if you are using a cloud based software such as Xero, it makes it much easier to measure your success at anytime and from anywhere in the world!
Get in touch if you would like more information on how to create a tailored dashboard to monitor your business KPIs and enable you to achieve your goals and free up more time!Contact Richard
If you like this article and would like our FREE updates sent straight to your inbox then subscribe to our monthly newsletterSubscribe
All content © 2015 Armstrong Watson. All Rights Reserved. Website by Simon Pighills.
Armstrong Watson LLP is a limited liability partnership registered in England and Wales, number OC415608. The registered office is 15 Victoria Place, Carlisle, CA1 1EW where a list of members is kept. Armstrong Watson LLP is regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. Unless otherwise indicated, either expressly or by the context, we use the word “partner” to describe a member of Armstrong Watson LLP or an employee of Armstrong Watson LLP in their capacity as such.
Armstrong Watson Audit Limited is registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Registered as a limited company in England and Wales, number 8800970. The registered office is 15 Victoria Place, Carlisle, CA1 1EW.
Armstrong Watson Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 542122. Registered as a limited company in England and Wales, number 7208672. The registered office is 15 Victoria Place, Carlisle, CA1 1EW. Armstrong Watson Financial Planning & Wealth Management is a trading style of Armstrong Watson Financial Planning Limited.
Armstrong Watson Trustees Limited is a limited company registered in England and Wales, number 84495656. The registered office is 15 Victoria Place, Carlisle, CA1 1EW.