If you’ve been paying attention, I’ve been diving pretty deep into inflation-proofing measures for your business. I want you to have the tools to not just survive these rollercoaster times, but also to thrive.
The thriving starts with taking a good look at the numbers so that you can make any necessary shifts to get you back on track.
And with only four and a half months left in 2022, my team and I here at Masterpiece Accounting Services are focused on helping you reach your business goals this year.
We exist to make your business life easier. We take great joy in providing our business-owner clients with sharp vision into the financial realities of their businesses, and the insight to go with it…
But, as you can probably gather by the fact that I take the time to write to you each week — I’d be glad to assist you with *every* aspect of setting and reaching your goals. We’re much more than just some dry advisory firm, after all.
Now … about those goals you made for the year. You can’t do anything about them if you don’t actually measure them. Which is something we particularly enjoy helping our clients do. Here’s what I mean…
Using KPIs in Your Business’s Goals
“Life is the art of drawing without an eraser.” -John W. Gardner
Peter Drucker once said “what gets measured gets managed,” and it continues to remain true — regardless of advances in technology, and the multiplicity of tools we now have.
You see, accurate measurements provide feedback and it’s (only) with this information that you can make informed calls.
Think about your own personal goals (assuming you have them!). Perhaps last year you wanted to lose 20 pounds — so what would you do? One option would have been to get on the scales on January 1st, 2022, and then simply compare your weight to your weight this week, one year later. I doubt you’d have had much success.
Instead, you’d take regular measurements of your weight between the start and end date and make informed adjustments to your diet and exercise regimen according to what the measurements told you. You’d manage the process.
You see where I’m going here: It’s exactly the same for your business work goals. If you measure your key metrics, you can manage their performance. Each and every business has key performance metrics (KPIs) – some of which are common to other businesses, some of which are industry-specific, and some that are created by the company.
These sorts of things are our bread and butter when working with small businesses.
There are financial metrics common to all businesses. These include:
* Average transaction value
* Gross profit margin
* A measurement of a company’s efficiency during the production process
* How much is left over after COGS
* Gross Profit divided by Total Revenue
* Net profit percentage
* The amount of profit for every $1 of revenue generated
* Net Profit divided by Total Revenue multiplied by 100
* Debtor days or receivable turn days
* How long your customers take to pay you. (The sooner your customers pay, the sooner you can get that cash working for you.)
* 365 (days in the year) divided by Sales on credit or invoice divided by Average Accounts Receivable.
More industry-specific KPIs might include:
* Table turns per night.
The number of times a restaurant is able to sit customers at a table.
The number of hours a machine in the production line can run.
* Rejection rate.
The number of defects rejected in an assembly line.
Non-specific KPIs might include:
* Customers won/lost.
* Customer complaints/product returns.
* Staff sick days.
You must absolutely integrate the RIGHT measurements to get proper insight into your business’s performance.
I hope this gets your juices flowing. Many of these financial indicators are things that WE can help you to implement … if you let us!
I’m also grateful for our partnership, and for your referrals. Which, of course, is why we’re right here:
Let’s get something scheduled if you want those insights to get things recalibrated for the year so you can finish strong.
Helping you to thrive,
Masterpiece Accounting Services