If you’re not where you want to be, how do you know what will take you there? This is where Key Performance Indicators (KPIs) are important for your business.
How do you measure success? To run your business as efficiently and productively as possible, you need to measure your performance. There are key components that you can look at to figure this out.
To identify your KPIs, ask yourself some questions. It may not always be obvious what the measures of your success are.
'Success is not final, failure is not fatal, it is the courage to continue that counts'
- Winston Churchill
You don’t want to settle on elements just because you can measure them. Monitoring takes time, energy, and resources so it’s important to pinpoint the right KPIs to tell you whether you’re achieving your goals. If you haven’t already articulated your goals, then it may be worthwhile to take a step back to do that.
Start by asking:
What is important to you? Reducing debt? Improving financial performance or increasing production?
What are some of your key concerns? Cashflow, and employment of staff have been key areas for most businesses during 2023.
How has your business been performing compared to last year? What is potentially going wrong and what could be done better?
Do you have enough stock? Do you have obsolete stock?
How do your expenses compare to last year when expressed as a percentage of turnover? Are they all relevant to your operations?
How do your bank balances compare to this time last year? How about your payables and receivables? Will your suppliers give longer terms? Can you incentivise debtors to pay more quickly?
Do you need to raise equity? Or would you prefer to borrow?
What have you achieved this year that you are proud of?
What is important to you in the short term? What about longer term?
Other important areas to review:
How are you paying yourself? Salary, distributions, dividends or a company/division 7A loan? Ask your accountant which is most suitable.
Do you have a cashflow forecast? Are there any forecasted dips that you need extra cash to cover? Its best to arrange a bank loan before you need it!
How can you encourage clients/customers to pay more quickly?
Do you have full time or part time staff and are you aware of their annual leave entitlements?
Have you sent updated wage information regarding workers compensation? Failure to do this can result in unexpected payables/cashflow issues.
Do you have an ATO payment plan and will you be able to meet your future obligations.
Subscription creep is real! How much do you pay in subscriptions to apps and other systems? Are they all necessary and meeting your expectations?
Analysis is only possible if your underlying data is up to date and accurate. Make sure that your bank reconciliation is complete and that your balance sheet reflects the correct bank balances. Your accountant can assist with this as well as check other items in the balance sheet for you.
"Good fortune is what happens when opportunity meets with planning"
- Thomas Edison