Key Performance Indicators (KPI s) help businesses of all sizes from a small business or SME to a much larger company or organisation define and measure progress toward business goals.
KPI s are quantifiable measurements, agreed at the outset, that reflect the critical success factors of a business or organisation. They will differ from business to business.
KPI s are a critical tool in helping to ensure a business is focused on achieving its desired goals.
There are many examples of KPI s but it is important to recognize that they will vary from business to business and will depend on the specific objectives of a business at a given point.
Finance related examples of KPI s may include any of the following 25 examples of KPI s which is not an exhaustive list:
- Accounts Receivable Collection Period
- Cash Flow Return on Investments (CFROI)
- Cost Income Ratio
- Cost per payslip issued
- Creditor days
- Cycle time to process payroll
- Cycle time to resolve an invoice error
- Debtor days
- Direct costs
- EBIT
- Fixed costs
- Gearing
- Invoicing processing costs
- Number of invoices outstanding
- Number of overdue invoices
- Percentage of bad debts against invoiced revenue
- Percentage of financial reports issued on time
- Percentage of invoices disputed
- Percentage of invoices under query
- Profit per customer
- Profit per employee (FTE)
- Profit per product
- Profit per project
- Return on capital employed (ROCE)
- Return on Equity (ROE)
There are literally hundreds of KPI s that may or may not be applicable to your enterprise. The key is to identify the ones that a critical to the success of your enterprise.
KPI s are a very valuable performance management tool for sole traders and SMEs through to larger companies and international organisations. Sadly, the need for the use of KPI s is not as understood as it should be in SMEs so therefore are not used as often as they should be.
Small business or SME owners need not be afraid to embrace the use of Key Performance Indicators as there are a number of business to business consultant resources that are there to help a SME develop and identify a dashboard of the most relevant KPIs for their operations so that there is a true understanding of what drives the underlying profit performance which therefore increases the likelihood that an owner will be successful in meeting the stated goals and objectives for that enterprise. Knowledge is power as they say and monitoring KPI s provides that vital knowledge.
