When was the last time you made sure your monitored metrics are as effective as they could be?



Metrics and KPIs are measurements that you’ve probably worked with for most of your career, and setting and monitoring them is likely second nature to you by now.

But when was the last time you really thought about your metrics and KPIs, analyzed them, and made sure that the metrics you’re monitoring are as effective as they could be? And that you’re monitoring them the right way?

Let’s take a step back, and remind ourselves what metrics and KPIs are, and why they’re so important to our businesses.

Metrics are measures that are used to monitor and evaluate all the different parts of your business. I believe for our purposes Metrics are broader than KPIs.

KPIs (Key Performance Indicators) are a subset of metrics, and let you measure specific, highly critical areas of your business. Specifically, you should be looking at how KPIs are trending, looking for improvements, and determining how you can improve overall performance.

The Importance of Metrics and KPIs

Tracking metrics lets you improve overall results and align your people and processes with your organizational objectives, as well as giving you the following benefits:

  • Measure financial performance – vital for keeping your cash flow healthy.
  • Reveal the truth about performance, from the highest level (your overall business), through departments, teams and right down to each individual.
  • Provide an actionable way to achieve overall business strategies and goals.
  • Make sure employees are aware of what’s important to the business, by showing them what the business is being measured against.
  • Highlight any issues that might otherwise go unnoticed, meaning that efficiency and productivity are given a boost.

How to Choose the Right Metrics and KPIs

Of course, telling you how important metrics and KPIs are for your business doesn’t do you much good if you don’t know how to choose the right ones. It can be easy to fall into the trap of randomly selecting a bunch of KPIs just for the sake of having them – I’m sure we’ve all been there at some point – but whatever measures you put in place need to help you reach the most valuable goals.

Start by looking at high level metrics that are crucial to your business, such as net income or days to close, and choose KPIs that help your team improve processes. Successful KPIs will help you to monitor efficiency and ensure that individual departments are aligned with overall business metrics.

Think About Employees When Setting KPIs

Don’t just think about data when you’re setting KPIs, think about employees too, because your people are probably the most important factor when it comes to success or failure. KPI targets need to be achievable yet challenging, and it can be difficult to find the right balance. Think about it, too easy and your employees could become complacent (and the KPIs won’t improve), but not achievable and your employees will become frustrated and demotivated. Keep raising the bar when it comes to KPIs by increasing individual and team targets when needed, particularly in areas where there are problems or backlogs.

Let’s look at Accounts Receivable as an example. Let’s say that one of the KPIs you’re measuring is, naturally, aging. If you have targeted to reduce 60 day plus debt by a certain percentage or value, you can keep altering that percentage or value as the debt reduces over time. The more cash that’s collected, the more your aging will improve, and it follows that the aged debt will be easier to collect.

How do your business’s metrics and KPIs measure up? Don’t forget that KPIs need to be very specific, and targets should be set for individuals as well as teams. They also need to be easy to analyze for you to be able to really see the benefit. Once you’ve defined and developed the metrics and KPIs that are important for your business, you can monitor them closely to ensure success.

I’d be interested in hearing what metrics and KPIs you use currently, and how often they’re reviewed.

Kurt is CEO of Bison Analytics. He is the most experienced business intelligence practitioner to tackle QuickBooks. His work has enabled rapidly growing and successful business CFOs to extend the life of QuickBooks in their financial and performance operations, saving these companies valuable dollars and time.


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