Most people visit their doctor at least once each year for a physical review that provides a sense of one’s bodily health.  Your business needs and deserves a similar checkup, albeit for its numbers as opposed to a the human body.

If you are like most business owners and managers, you aren’t sure how to perform such a financial checkup of your business.  Key performance indicator reporting, commonly shortened to KPI reporting, is the answer.

KPI Analysis Assesses Business Financial Health

Chances are, you often wonder how healthy or unhealthy your business really is.  Instead of moving forward with challenging decisions based on gut instinct, rely on accurate numbers for a clear picture of your company’s financial health.

KPI reports provide invaluable insight into a company’s financials, offering an inside look at everything from equity to debt and more.  As an example, such reports help business owners and managers understand whether debt outweighs equity, providing an opportunity to make changes that pave a path toward a healthier debt to net worth ratio.

Use KPIs for Decision-making

KPIs provide accurate and insightful information about an enterprise’s numbers.  The insights obtained through KPI tracking are essential to decision-making processes.  Most businesses use KPI reporting to set target goals, such as rates of customer retention.  It is in the interest of those enterprises to continue to measure KPIs moving forward, make strategic alterations as necessary, and guiding the business to new heights through numerical analysis.

The challenge lies in developing the optimal strategies to make progress toward desirable KPIs.  As an example, a business manager or owner who wants to move the company toward a higher customer retention rate will have to do some work to understand the factors that shape that rate.

Such an enterprise should reach out to customers at specific intervals of time following a purchase, serving as a reminder that their business is valued.  Additional examples of actions that can be taken to boost the customer retention rate include loyalty programs, discounts and post-purchase interviews.

Examples of KPIs to Track

The KPIs that your business tracks will likely be a bit different from those used by other businesses, especially those outside of your niche and industry.  Commonly-used KPIs include conversion rate, monthly recurring revenue, social media engagement and website traffic.

Customer acquisition cost is especially important as it reveals the total cost of adding a new customer to the business.  The lifetime value of a customer shows the value of a single customer to the business across the entirety of the relationship.

Above all, focus on net profit, meaning the company’s income after taxes, expenses and costs are subtracted.  Alternatively, net profit margin is the amount of profit made as a component of revenue, typically stated in terms of a percentage or ratio.  Net profit margin reveals the company’s profit in terms of gain for each dollar raked in through revenue.

Tools for Tracking KPIs

Take a look at the latest high-tech innovation that paves a path for accurate KPI tracking, and you’ll find plenty of options.  As an example, Google Analytics is ideal for online businesses, helping companies track site metrics including conversions and traffic levels.  Social media scheduling features are now available to gauge social media engagement figures.

Cloud accounting software facilitates checking financial figures whenever desired.  Such software has even advanced to the point that there is a dashboard that displays the most important metrics as selected by you, the business owner, manager or employee.

Carve out a Specific Time for KPI Reporting

Once your KPI reports are in-hand, give them your full attention.  Ideally, KPI reporting will have its own dedicated time period for analysis, be it quarterly or monthly.  Establish a time for KPI reporting including in-depth analysis, hold true to that commitment and make timely changes as appropriate.

Lean on our savvy team of business accounting, bookkeeping and other specialists for assistance with KPI report generation along with comprehensive analysis.

Bookkeeping & CFO Solutions 5280 is at Your Service

Our accountants and bookkeepers help businesses like yours with reporting, number-crunching and plenty more.  Let us get to work on your books, generate insightful KPI reports, and help your company reach its true potential.

Contact us today to learn more about how our team can help your business.  You can reach us by phone at (720) 608-6240.  You can also reach us by email at candice@bks5280.com.