Identify and use your Key Performance Indicators

What are KPIs? Key Performance Indicators are variables which reflect / measure the critical success factors of your business. KPIs will vary depending on the nature of your business and your business strategy.

Operational reporting - sales and margin reporting

Some KPIs must be focused on the short term, others on a long-term strategy. Because of this, a company should include both the current month’s sales in its KPIs, as well as the year-to-date sales, in order to monitor the medium-term evolution.

The chosen Key Performance Indicators should:

  • reflect the organisation’s objectives
  • be the key to success
  • be measurable

Once the definitions of what they are and how they are measured have been established, they basically do not change anymore.

1. Start with financial indicators

If a Key Performance Indicator is of any value, then there must be a way to accurately define and measure it. As a result, many companies start with financial indicators based on accounting. KPIs built on accounting data are quickly implementable and require little investment.

KPIs based on accounting are therefore the Olympic minimum for any company. Financial KPIs can consist of statistics on both balance sheet accounts and/or profit-loss accounts. For example, a bank balance or “Days Sales Outstanding (DSO)” are indicators based on balance sheet accounts. Once the financial KPIs have been implemented, one can dive into the operational systems. Suitable KPIs can be derived from the large amount of operational data. For example, volume produced, number of orders received, number of FTEs, average margin per project, …

2. Follow up on them

Update the KPIs regularly and use them in daily management reporting. Include the KPIs in the budgeting and compare current KPIs with the budget and previous periods.

Ensure that KPIs are monitored and take action if KPIs remain below expectations. Challenge your management every month to improve 1 or more KPIs, possibly linked to a bonus system. For example: next month, improve the number of days of customer credit by 10% (and show the effect of this action on cash flow).

3. Develop a dashboard

In addition to the monthly monitoring of the results, many companies are investing in the development of a dashboard to monitor the business on a weekly, daily, or even real-time basis through a number of measurement points. After all, monitoring operational KPIs is an indicator of what is to come and still allows management to take short-term actions when necessary. Measuring is knowing, rather than measuring is sweating!

The success of a dashboard depends on the extent in which it is used. Therefore, more is needed than a technically functioning dashboard with the right data. For your dashboard to be used, it must be effective and attractive, and preferably consultable anywhere and anytime.

The implementation of a dashboard does not always have to cost a lot of money. Existing tools, such as BrightAnalytics, can be linked quickly and efficiently to various ERP and accounting systems. These tools allow you to raise reporting to a higher level in the short term, and to increase the level of employee involvement. Getting the noses to point in the same direction is one thing, a dashboard is your first tool to keep them in the same direction.

BrightAnalytics centralizes all your financial and operational data. The powerful and clear dashboards provide instant insight into the state of your business and put your operational data in context. Compare performances, build as many top 10’s as you like, or spot risks and anticipate trends in time.

BrightAnalytics offers a 360° overview of your organisation and allows you to make efficient, well-founded strategic decisions.

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