As your business grows, you may begin to lose some of the intuitive feel you once had on its performance. Maybe you don’t “know” all of your staff anymore. Perhaps your grasp on management’s capabilities is not as strong. Maybe you’re no longer able to effectively gauge employee productivity. You may notice the company becoming more department-oriented rather than individual-oriented.

All of these are signs that the business advisors at Doeren Mayhew often see when it’s time to implement some higher-level financial expertise to help clients build the numbers needed to run the business.

Key performance indicators (KPIs) allow you to measure your success at achieving operational and financial goals by tracking business components such as:

  • Financial Statements – How have you performed historically and how does that compare to current performance?
  • Leading Indicators – Measuring backlog, orders, hours worked, product reports.
  • Cash Flow – How much do you have in cash? How much do you have in accounts receivable/accounts payable? Do you need to consider loans?
  • Monitoring Capacity – At what percentage capacity are you? Do you need to expand facilities/prepare for growth?
  • Employee Productivity Numbers – Who are your top performers? How can you tell if certain team members are being productive?
  • Weakness in Management – Combined with productivity numbers, departmental indicators can give you tremendous insight on your management team. Which departments are causing “bottlenecks,” and is it due to management or other issues? How well does your management attract and retain employees? What information should you arm managers with to help them make informed decisions?
  • Quality Indicators – How are you measuring quality assurance? Before, you may have been more aware of problems voiced by customers, but you may hear less and less of these complaints as your client base grows.

Why measure these components? Because KPIs help you to:

  • Facilitate better management.
  • Identify existing or emerging issues, as well as negative trends, before they become a problem.
  • Serve as a change agent – what’s being measured is more likely to improve.
  • Align long-term goals with short-term performance.
  • Provide milestones while working toward long-term objectives.
  • Promote understanding of areas critical for success.

Setting up and reporting on a KPI system is a first step toward solid financial performance, and is one of the key ways your business advisors should be providing you with insight into your business.

For assistance implementing KPIs in your business, contact Doeren Mayhew, with CPAs and business advisors in Michigan, Houston and Ft. Lauderdale.