Tracking the performance of your business especially in
the growth, and maturing stages of your company is very critical for long term
success. Many times management is
focused on the front office of the business and they should be. However, tracking the performance of each
component of the business can drive results faster. There is an old saying that 80 percent of
your results come from 20 percent of
your efforts. The 80/20 rule holds true
for business and this is why tracking the financials and key performance indicators
should be done on a monthly basis.
Financial
Reporting for Management
Most companies have a strong financial reporting team
with a controller, director of finance to ensure the accuracy and completeness
of the financial records. The finance team executes monthly financial
statements, closes the books for the month and may even review some key performance
Indicators.
Top
Key Performance Indicators for CEOs
Net
Profit:
This may seem like an obvious one, but is the starting
point for your management team. Everyone
on the management team should know the monthly net profit and work towards
targets for the month, quarter and the year end.
Progress
towards targets:
The only way to know if you’re hitting your targets is to
have a plan in place and track the execution over time. Measuring the progress towards your plan
provides clarity on where you stand and what is necessary to achieve your
desired results.
Revenue
and revenue growth rate:
Measuring your revenue is great, but what is your revenue
growth rate? Is it 5%, 10%, 20%? You may think you had a great month or
quarter, but do you know at which rate your revenue is growing and are you satisfied
with this rate of growth? Measuring the growth rate for your top line allows
you to focus on your targets and execution.
Expenses:
Seeing a breakdown of your expenses will help identify
which costs are draining your business.
Large increases in expenses that are not generating multiple returns for
your revenue growth will hold down the success of your business as profits will
stay flat or even decrease.
Revenue
per employee:
This can help measure the return on investment of your
staff. Helping determine whether your
revenue growth can support hiring additional employees, and whether your staff
is at capacity or whether they have too much downtime.
Employee
engagement:
Your management team monitor the general morale of your employees
to ensure they are motivated and working on engaging projects. You can also
hold survey’s to get employee feedback on overall. It is very important that your employees are
happy in their work environment and care about their work.
Profit
per customer:
This tracks how much your client’s are spending. Focusing on client relationships, delivering
value, and understanding their needs can really increase your profits. At the day as my economics professor used to
say, profit = the difference between the value your company delivers and the
sales price of your product or service.
Order
fulfilment cycle times:
Measuring the progress to completion of your sales orders or service deliverables allows you to determine the speed at which you invoice. The faster you deliver, the more the customers are satisfied.