It’s too easy to have KPI overload. Even accountants can lose focus with too many numbers so it helps to have just THREE numbers to monitor that will help to transform your business. Having just 3 key numbers helps to create clarity rather than getting lost in the fog of too much data. KPIs shouldn’t just be passive but should show the results of your ACTIONs.
So which ones should you choose? Well, it depends on your business goals so your three KPIs will probably be different to mine. Are you aiming for growth, profitability, cash stability, efficiency, work-life balance or something else? Proactive accountants can focus on the three numbers for each of their business clients in order to offer the most appropriate advice.
Start by thinking what a good year would look like for you.
You can then identify one KPI in each of the following areas:
1.Profitability
e.g. gross or net profit.
This helps you to develop a sustainable business and should be a consideration in all pricing conversations. As our overheads are fairly fixed I focus on monthly turnover.
2.Cashflow
e.g. cash runway, debtor days.
Cash keeps you in business and gives you the stability and confidence to invest in whatever you need to achieve your efficiency or growth targets. Most of our clients are on monthly fixed fees and direct debits but I focus on any late payers amongst our smaller annual clients and ad hoc consultancy work.
3.Performance/growth
e.g. revenue per full time equivalent employee, average client value, utilisation rate.
This is an essential part of efficiency and scalability. I track my total working hours so that I don’t get sucked into the long bours trap. When my kids were small and my working week was capped at 25 hours (the length of a school week) I focused on my profit per hour. My favourite KPI was with a coaching client who tracked her golf handicap to ensure that her work-life balance allowed her enough time on the golf course and not slaving over her desk.
KPIS should be simple to understand and measure and directly related to the management action.
KPIS are not set and forget. They should be reviewed weekly, monthly, or even daily. And you may change your KPIs as you grow stronger in one area and need to shift focus a little as your business evolves.
Clarity beats complexity and using just three KPIs keeps things clear and simple.
If you want somebody to help you set and track your three numbers for a successful business then please get in touch:
https://calendly.com/hudsonbusiness/minerva-clarity-review-business-advice-350-vat