What are KPI's?

What are KPI’s?

KPI’s or Key Performance Indicators are important parts of your business which help make you successful. They are the parts that you need to focus on as you start the process of growing your business and turning it in to the lifestyle business that you want. They are a measure that we can take and follow over a period of time to see how your business performs.

A KPI can be how quickly you can get paid for the work that you do.  Once we know a KPI like this we can follow how quickly you get paid over a period of time. If it was taking you over 45 days to get paid we can follow that KPI and we can set you targets to improve this. We can also discuss how you try to collect the money that you are owed and suggest ways to improve this process.

If we can improve the way that you collect your debts and the time was to reduce to 30 days. We can say that you have improved a KPI for your business. You are getting money in quicker and that money you can use in your business.

We can set up KPI’s for other parts of your business and set to follow these and work with you to make changes to your business to improve the KPI’s and improve your business.

Why do you need KPI’s?

KPI’s are one of the important tools that you have to improve the performance of your business. They give you a way to measure your business performance. Once you measure it you can focus on what needs to be done by trying to improve it.

They give focus to a broad question like I want to make my business better. When you can break that question down in to small bite sized chunks and work on them you will find a way to move your business forward. That can be in getting paid quicker. But it can also be increasing the number of customers that you have or the cost of getting those new customers.

The cost of getting new customers will be important if you are looking to grow. If they cost too much your hopes of growing your business will not be successful. Tracking that KPI and finding new ways to get customers for less money will enable you to have that growth that you want.

What do they tell me?

KPI’s break down the process of improving your business to tasks that you can work on.  If your business is struggling with cashflow, the KPI’s for your business can be related to getting that money in quickly that you are owed. We can have KPI’s related to how quickly you get paid, how quickly you finish a project and get to send an invoice out and what you spend your money on once you get it.

We can set up the KPI’s relating to these and we can track and follow them with you. We can set targets and suggest processes to make sure that you meet these targets.

Once you have these KPI’s set up for your business you can start to work on improving and cutting out any waste in your business. The KPI’s that you have set up give you a way to decide what to do and how to measure how effective the changes are when you do them.

How do I use them?

The main reason to use KPI’s is to monitor the performance of your business. To make sure it is not going to have problems in future and also to give you the ways to improve and grow. Setting up KPI’s can do both of these for you. They can tell you when you are about to have problems and how to improve.

If for instance the time you took to collect the money owed increased from 45 days to 60 days, it would start to tell you that sooner or later that you were going to have a cashflow issue. Knowing that now will mean that you are able to start to take-action to correct. You can ask the team member responsible if there are any issues that you need to be aware of, or if you personally need to speak to your customers and ask them to pay.

You use KPI’s to guide and alert you to any problems in your business. You need to have them set up in your forecasts so you can keep any eye on them and discuss with Pisces if you have any problems. They are numbers that you need to keep an eye on and monitor for your business.

Which KPI’s do I need to use?

The KPI’s that you need to follow can be put into a number of groups.

Cashflow – cashflow is obviously a big KPI that you need to follow you need to be able to make sure that you can pay your bills and having a healthy bank balance is going to be needed to make sure that you are not having sleepless nights.

Debtors – Keeping on top of the money that you are owed is going to be necessary if you want a good and healthy cashflow. KPI’s relating to how quick you can collect your money are ones that you should follow and track. Being able to see any delay in collecting payment for invoices should be resolved as soon as you can.

Projects – being able to finish you’re your work on time and to your customers satisfaction will mean that you can invoice quickly, retain a happy customer and move on to your next project. Tracking this will be essential if you want to have a successful business.  Any delay will impact your costs and profits.

Customers – There are a few KPI’s to monitor for your customers, how much it costs you to get a new one and how long they stay with you and if you lose any during the year. These are important to know if you have a difficult customer that you want to stop working for how much or how long it will take you to replace them.

Gross Profit – You should always track this gross profit in your company. This is what all the others are about. Increasing this KPI. Track this KPI and see how all the others fit together and make your business better. If after all your hard work are you seeing the reward that you want?

Non-Financial KPI’s

The KPI’s that you follow can also be non-financial. That is not one that we can put a money value on. They can be the quality of the team that you have and how well motivated they are to work.  They can be how many projects that are delivered on time to your customers and if you had to make changes to these projects or work.

Whilst non-financial these will impact the success of your business and need to be tracked and followed to make sure that you are aware of them. They can be things that give your business an advantage in getting your work done and keeping your customers happy.

How can we help?

This first step in this process is getting to know you and your business. We need to know what you want form your business and how you want to make it better. Once we know these we can help you set up the KPI’s t hat you need to follow and track.

We will continue to track them with you on a monthly basis and we can discuss processes that you can start to use in your business to improve them and make your business better.

If you want to take the first steps in this process you can book a call with us and discuss how we can help you.