Keeping your business afloat with Financial KPIs
I think that if you were searching for universal KPIs that are beneficial for any business to monitor (large or small), then I think you'd agree that financial ratios and metrics are the best place to start. By definition, a business is about making a living (read: money), and if you don't understand your cash-flow, then that living is in jeopardy. That's an obvious way financial KPIs are important - a not so obvious way is that once you starting taking the microscope to your fiscal health, you realize just how interconnected each area of your business is.
It's like dropping a stone in a pond when you are trying to keep a paper boat afloat. The ripple created by that stone rapidly expands outward and influences the environment as it passes. The thing is, that the stone rarely drops in the same place twice. Maybe it's your online marketing campaign that strikes a chord, and now your sales department is a flurry of activity trying to convert leads into customers. Or, perhaps it's your warehouse where a backlog of orders is resulting in increased call volume in your call center. The one thing that we believe is that wherever that stone drops, you can measure the results.
Your financial ratios and metrics are like a survey of all those ripples and that information is used to measure the impact of each wave on your paper boat. No captain would willingly sail his boat into a storm, so you need to have an accurate forecast of what is going to happen next. That's why financial metrics are so important. They not only provide you with a map of where you are going, they also provide you with a status report of your performance metrics along the way.
Want some more KPI Examples? Check out these articles:
Just for fun, here's a KPI for anyone wanting to continue the sailing analogy:
What department's KPIs would you like to see in this list? Let us know!