Setting goals is an essential and necessary step in any business decision. They must be clearly defined and directly contribute to achieving a business strategy. Typically, upper management outlines the goals for their department or line of business based on organization-wide goals which support the overall business strategy.
The goals have been defined.
The team has been established.
But wait?
How are your goals going to be measured? It’s great to aim at a target—i.e., your goal—but how do you know you’re taking the right steps to get there?
Key Performance Indicators (KPIs) are a set of indicators that help organizations assess progress toward strategic goals. It involves capturing specific data and converting it into useful metrics.
Measuring and benchmarking the right KPIs is vital to the success of your business and are important metrics to ensure you accomplish your goals. They enable you to understand the performance and progress to make any necessary adjustments in your execution to achieve your goals without getting into all the details.
It’s important to set up your KPI dashboard to have real-time performance visibility. You no longer have to wait for stale financial statements that are issued fifteen days after the month’s end. KPI dashboards are essentially the grouping of your KPIs so you can see a visual representation of your metrics in one place and side by side.
As it relates to tracking your business’s finances and operations, you need to know where you’re spending, saving and allocating your money in the best, most efficient and productive way. Your KPIs are the fundamental driving force of your business, and you need clear and real-time visibility over your cash flow and operations. All of your information should be easily accessible and clear.
It’s essential to evaluate your performance and progress along your way to achieving goals. KPI tracking helps your team drive improvements by providing every team member with a single point of factual information for performance management. Every member benefits from actionable insights, improving efficiency and productivity.
As you’ve established and are effectively referencing your KPI dashboard, tracking key indicators like revenue, gross margin, location profitability and the number of employees sets targets by which to be measured. You can decide how often you want to be measured: at the start of every year, quarter, month or week.
As you monitor and track your progress, you’ll also find that you’ll realize improved decision-making. There are many opportunities to adjust and pivot along the way to achieving your business’s goals. Monitoring KPIs helps your business to quantify your progress, as well.
How are you progressing? Are you in front of the industry, or are you falling behind? A KPI dashboard provides a complete overview of progress towards the company’s strategic goals and can also benchmark you against industry peers. Once again, tracking your KPIs gives you the chance to evaluate where you stand every step of the way and provide you with benchmarks for your business the very best in class.
Should you have questions or wish to discuss this information in more detail, please contact Jeremy Bronson.
Article written by:
Jeremy Bronson, CPA, CVA, CEPA
Director, Assurance & Business Advisory Services