What are KPIs?
It all begins with an idea.
KPI stands for key performance indicator, a quantifiable measure of performance over time for a specific objective.
KPIs provide targets to shoot for, milestones to gauge progress, and insights that help business owners make better decisions.
A common KPI is net profit margin. Calculated by taking (Net income / Total Revenue) * 100, net profit margin is expressed as a percent and measures how well your company can turn every dollar of revenue into profits. It can give you an idea of how to stay competitive in pricing your products and the profitability of your company.
For example, if revenue is $1,000,000 and net income is $100,000, net profit margin is ($100,000 / $1,000,000) * 100 = 10%
Every accounting KPI should have a goal in mind that is SMART: specific, measurable, attainable, realistic and timely. This will allow you to track your progress as your business gets closer to achieving its goals. Also, remember that KPIs are only as good as the numbers that are used as the inputs. Therefore, accurate accounting and recording of your revenue and expenses is essential.
If you need help developing KPIs or reaching your KPI goals, let’s work together!