Monitoring your key performance metrics
Monitoring your key performance indicators, numbers and metrics are an important part of running a successful business. It’s not all about measuring profit and loss either.
Which you use, and how you track them will depend on your industry and business model. A business advisor will be able to help you work this out.
The Ministry of Business, Innovation and Employment has a great article on Key Performance Indicators (KPI’s), here are a few from it. Or check out the full article here.
Revenue - How much money your business has made.
Expenses are not included in this figure — just your income. Your revenue is all the money you make from your products or services, as well as any other income you earn, e.g. interest on savings and income from investments.
Net Profit - Revenue minus your expenses “Bottom Line”.
While profit is almost always a good thing, a loss isn’t always bad. It’s about context — it’s common to operate at a loss if you’re just starting out or if you’ve made an investment with a plan for it to pay off later. But you’ll need to make some changes if your business is continuously losing more money than it’s making.
Net Profit Margin - Net Profit as a percentage of your Revenue.
This figure will tell you how successful you’ve been at making a profit vs covering costs.
Operating Costs - How much it costs to run your business each month.
This is the amount of money you spend on keeping your doors open. It includes everything from staff salaries and rent, to the money spent on topping up coffee supplies in the staffroom.
Utilisation Rate - The level to which your people and assets are in use.
There are a couple of ways to calculate this metric. A common way to measure the utilisation rate of your employees is as the percentage of billable hours each person clocks compared to the total number of hours they work.
For your assets, it’s the percentage of how much each asset is in use compared to its full capacity — or the percentage of how much revenue each asset earns vs its maximum earning potential.
Employee Engagement - The level to which your people are engaged with their job and the business.
Engaged and enthusiastic employees are more productive, while unhappy staff often have a negative impact on the bottom line. It can be difficult to get a specific measurement of engagement, but it’s important to check in with your people on how satisfied they are with their job and the business.
Current Customers - The number and value of your customers.
It’s a good idea to keep track of how many customers you have, and how often and how much money they spend. The more you know about your customers, the more you will be able to maintain good relationships, create great customer experiences and drive your marketing.
If you need any advice on how to keep a pulse on your accounting KPI's, give us a call on 033795338.