A Key Performance Indicator helps a company or organization in measuring its performance. The goal is to achieve key business objectives. With the help of key performance indicators, a business would be able to set up an objective and measure whether the company is on the right track to achieve its goals or not.
Different businesses use different KPIs to evaluate their success. However, there are some high-level and some low-level KPIs. Both are equally important. High-level KPIs focus on the overall performance of the organization. Low-level KPIs focus on processes/areas like marketing, call center, sales, and more.
How To Set Up Key Performance Indicators
Setting up KPIs for your business can be tricky. It is essential to keep in mind that almost all businesses have financial and non-financial KPIs. To develop vital KPIs, first, you have to understand your company’s objective and how you plan to achieve it. This process involves feedback from all board members and department heads.
Once you understand the company’s objective, your next step is to determine which process/areas need to be measured with key performance indicators. Keep a few questions in mind when deciding on the KPIs:
- What is your company’s desired outcome?
- How to measure the company’s progress?
- Who is accountable for the outcome?
- How to influence a positive outcome?
Different processes or departments need different KPIs. For example, let us say the goal is to increase sales revenue this year; it will be known as the Sales Revenue key performance indicator. The question is, how are you going to define this KPI?
- Increase sales revenue by 25%
- Hire an accountant for bookkeeping
- Motivate customers to buy new products
- The sales office is responsible for reviewing KPI, which will be reviewed monthly
- Achieving the target will be beneficial for the business
The most crucial factor in any business is bookkeeping. Keeping track of the business accounts could be challenging. However, if you already have a soundtrack of your funds, it will be easier for you to develop KPIs.
Do Key Performance Indicators Define Success?
Whether it is a small business or a large organization, both need KPIs to set their objectives. To follow their objectives, they need a robust strategy that will help them in achieving their goals.
Many business owners believe that KPI practice is old-fashioned; however, they do not realize that it is only effective when inspired. Some businesses adopt KPIs without even practicing them and then wonder why it did not reflect any positive outcome for their business.
Key Performance Indicators are a form of communication. For example, when planning for a new project, you discuss the pros and cons with the team. Next, you develop the strategies that will help you obtain success; the communication you and your team hold is similar to setting up key performance indicators.
You have to communicate with your team and different departments in your organization to achieve a successful outcome; the more precise and relevant the information is, the more easily it is acted upon.
The fact is that KPIs are effective when you make them valuable, as it requires time and effort. Best-selling author Bernard Marr wrote in his article, “What the heck is a KPI?” This topic sparked an interesting conversation among the audience. However, conclusions remained the same – that KPIs value remains in favor of those that use them.
Keep in mind that every action in the business counts. Your business strategies should be firm and must be followed to produce a positive outcome for your business. Your key performance indicators could be a door to success if you understand their value and find a way to implement them.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.