We recently did a blog post about the first step in getting your financial house in order by starting with budgeting. However, that is not where you should stop if you are serious about making your business a business. You need to implement systems and processes so that your business can run without the business owner having his or her hand on every little piece. One of the easiest ways to remove yourself from some of the minute details of the business but to still keep a good feel for the pulse of the business is to develop and track key performance indicators (KPIs).
Key performance indicators are metrics, financial or otherwise, that you want to track on an ongoing basis so that they will help you identify early when things are going well as well as when corrective action needs to be taken. Some examples of KPIs to track are number of new customers in a week, sales growth against same period prior year, lead conversion percentage, etc. What to actually use depends upon the businesses, its challenges, and well as where it is in the growth cycle. Once established, KPIs are most often tracked on a weekly or monthly basis. Much of the data may be quickly accessible.
As one of the fastest growing CPA firms in the Wilmington, NC area, I believe it is really important that we track our KPIs weekly. It may take up to an hour a week to pull together the data to for our KPIs and prepare them for our team meeting, but it is well worth it. More important than that, is that KPIs give confirmation that things are going well or when there is something in the business to look more closely at.
There are web based KPI dashboards and tools that will integrate with many of your small business systems. The trade off is that you might have as much customization on your KPIs. They give you a slick look and feel and can minimize the time you spend pulling together data. Feel free to ask us questions about setting up KPIs and a monitoring system for your business.