It is essential businesses measure the correct figures to have a clear grasp on their performance. Many businesses already do this, but the business metrics they use aren’t always targeted or focused on achieving their business’ objectives. Instead they are those that are easy to measure.
What to Measure
It is easy nowadays to have up-to-date financial information; however, this is just the beginning for the businesses we work with. We take a business’ financial information and undertake financial modelling where we look at the cashflow forecast for the business over the next 12 months. This allows us to see if there are any potential problems and to ensure the business is on track to meet its short-term goals.
Once we have a clear financial picture of a business as it is now, we begin to discuss with our clients what the important business metrics are, which determine their future success. At this point it is easy for us, as accountants, to blind clients with jargon and try and measure as many KPIs as possible, but this does not help the company when it’s trying to improve and grow. Therefore, we keep the metrics we measure simple and concentrate on profitability, cashflow and business improvement.
Whatever a business’ goals, it is necessary for us to work with them to set up the correct metrics for them to achieve these goals. I have discovered in most of my meetings that businesses measure the wrong numbers, which is often because these are easier to track. For example, I specialise in working with those in the recruitment sector and when I first meet with these clients, I find that they are purely measuring turnover. This is great to show if sales are increasing or decreasing, but does not give any context. I recommend agencies to also measure the number of calls a consultant makes per day and many other non-financial KPI’s to ensure the business is maximising the returns from the consultants. Often, if sales are decreasing, it is because there is a problem elsewhere. This also means that you can identify those consultants who are under or over performing.
It needs to be remembered that business metrics looked at in isolation cannot give you a complete picture of your business’ performance. You need to look at other factors that influence that metric to see if improvements need to be made, identify if trends are occurring or if there’s a problem. The secret is to start with a few simple, complimentary KPIs and every month increase the figures that you monitor. This will also give you a focus and show you where improvements need to be made or to measure the impact of changes on your business.
There is now great software available that makes measuring metrics a whole lot easier. By guiding my clients along their journey and discussing the figures that they should be monitoring on a regular basis, I have been able to help businesses become more efficient and grow when the time is right.
If you have ambitions to grow and would like advice on how this can be achieved in the best way, contact me on 0203 146 1604 or at email@example.com.