• To identify strengths and weaknesses in your business.
  • To analyse the financial impact of decisions before making them.
  • To get a health check of current and future financial position.
  • To look for ways to improve cash flow and bottom line profitability.
  • To predict possible tax liabilities before the end of the financial year.
  • To plot the future direction of your business in a manner that can be effectively monitored.
  • To create projections, discovering solutions and averting possible disasters.
  • To determine whether the next $100 of sales have a positive or negative cash flow effect.
  • To improve your financial literacy skills and help you to make better business decisions.
  • To understand how accountants, banks and other businesses measure performance.
  • See your accountant for advice, tips and ideas on how to go forward.

Measuring business performance with KPI’s

These days you need more than a set of financials to accurately measure business performance.

Today business owners and financiers are demanding more effective performance measuring systems that will not only enhance their performance levels, but also give them that all important competitive edge.

The traditional statement of financial performance, statement of assets and liabilities, and so on, is great for providing the financial information.

But what they don’t do is link operational performance to the business’s strategic objectives. Performance needs to be judged against objective criteria.

This is where KPI’s come in – Key Performance Indicators. KPI’s are those critical measures which ultimately determine profitability and shareholder value.

KPI’s are essentially a method of measuring business objectives against performance.

They tell businesses, amongst other things:

  • How well they provide services
  • How long they take to process customer requests
  • Their product delivery performance
  • How much time they spend fixing mistakes.

Investors are demanding to know that management strategies are creating value and business people need the appropriate tools to accurately measure performance in the critical areas of profitability and return on net assets.

The financials alone are not enough to effectively manage businesses that are seeking to survive and add shareholder and owner value.

KPI’s are a way to broaden what businesses measure.

Most small businesses would benefit from improving performance measurement standards, and while there are different views on how this should be achieved, one point is clear.

No single measure can provide a clear picture of a business.

The complexity of managing a business today requires managers to be able to view performance in several areas.

Understanding Key Performance Indicators will greatly assist in finding out the financial health of your business, identify the critical strengths and weaknesses and evaluate the impact of future business strategies.

Finding your competitive edge

  • Do your customers know exactly what you do and how you do it?
  • Do you go that extra mile for your customers?
  • Are you doing something different from your competitors that should be known by your customers?
  • Are there any other differences in what you do that stands out from others in your industry?
  • What are the strengths and weaknesses of your business and those of your competitors?
  • Are there any strengths that you have over your competitors?
  • How experienced is your team? Do they have a particular expertise?
  • How good is your quality control?
  • How well do you treat your employees or suppliers?

Chances are you’ve already found your competitive edge. If not, think about what opportunities are now available to your business to create a point of difference.