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
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.
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.
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.