Colorful graph drawn over tarmac and word PERFORMANCE with directional arrow, business design concept
KPI (Key Performance Indicator) -measurable values which demonstrate how efficient a corporation is at attaining key objectives of the business. KPIs are used for evaluation of success in the attainment of targets.

 KPI must be:

  • Well-defined and measurable
  • Well communicated to all departments of an organization
  • Vital to achieve goals
  • Valid to Line of Business

Financial Metrics

  1. Revenue: it is one of the most significant performance indicators to evaluate the success of the organization. Bookkeeping helps you in evaluating revenue.
  2. Expenditure: calculate cost effectiveness to find out the best methods for reduction and managing of costs. Expenses are determined from good bookkeeping practices.
  3. LOB profits vs. objective: it is an evaluation of actual profits and projected profits to identify the performance of a department.
  4. Expenditure Of supplies Sold: evaluate profit margin by calculation of production costs and assess product markup and actual profit margin.
  5. Day transaction Outstanding:  better the accounts receivable, better is the efficiency of the organization.
  6. Sale by area: analysis of sales area-wide helps in making better strategies in areas where sales objectives are failing to achieve.
  7. LOB operating expense Vs. Budget: comparison of forecasted budget and actual overheads helps in creating an effective budget for the future.

Customer Metrics

  1. Client Lifetime Value (CLV): CLV is helpful in determining the value received from a long term client of the organization. This is useful in keeping the best customers.
  2. Client Acquisition Cost (CAC): it helps in evaluating the cost effectiveness of a marketing campaign.
  3. Client Satisfaction & custody: by making customers happy and satisfied, you encourage them to become permanent customers.
  4. Net Promoter Score (NPS):  make a survey quarterly and evaluate company’s growth for long periods.
  5. Number Of clients: this is simple and straight forward KPI like Profit. Number of customers gained or lost determine whether customers’ needs are met or not.

Process Metrics

  1. Client Support Tickets: analysis of CPT helps in creating a successful customer service dept.
  2. Percentage Of manufactured goods defect: lesser the number, the better is performed.
  3. LOB effectiveness evaluates: Efficiency is measured by the number of products manufactured in specific periods.

People Metrics

  1. Employee Turnover Rate (ETR):  high ETR requires investigation and evaluation of packages and organization culture.
  2. Percentage of Response to Open Positions: large number of applicants depict that the organization is doing well and people want to work with you.
  3. Employee Satisfaction: the larger the number of happy employees, the healthier the organization.
  4. Retirement Rate: This  is important for developing strategic workforce plans.
  5. Knowledge Achieved With Training: determines the value of employee training and knowledge enhancement.
  6. Internal Promotions vs. External Hires: this metric is valuable for determining succession planning of the organization.
  7. Salary Competitiveness Ratio (SCR): used to assess the competitiveness of compensation options.

Customer Metrics

  1. Customer Churn Rate: determines percentage of customers who stop purchasing or availing the service.
  2. Contact Volume By Channel:  determines the number of customer requests and also the method adopted by customer for communication i.e email, phone or other.
  3. Percentage Of Customers Who Are “Very” Or “Extremely” Satisfied: Determines the opportunity to survey the expectations of customers.
  4. Number Of New Vs. Repeat Site Visits:  provides a differentiation of prospective clients and website traffic.

Financial Metrics

  1. Cash Flow from Financing Activities: demonstrates financial strength.
  2. Average Annual Expenses To Serve One Customer: the average sum required to serve one customer.
  3. EBITDA (Earnings before Interest, Taxes, Depreciation, & Amortization): Formula: (Revenue) – (Expenses Excluding Interest, Tax, Depreciation & Amortization) = (EBITDA).
  4. Innovation Spending:  the higher the spending figure, the more the value of innovation in an organization.
  5. (Customer Lifetime Value) / (Customer Acquisition Cost):  this value should be greater than one.

Conclusion

Periodic evaluation of KPIs is helpful in making a better strategy for entrepreneurship. It guides in making adjustments necessary for growth and expansion.

Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services 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 and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.