How do You Measure Key Performance Indicators?
Posted on 28th September 2017 in KPIs
Written by Freya Hughes
If you’ve ever tried to bake anything, you’ll know it’s both a science and and art. Just like in your business, you need to get every measurement spot on for if you want that delectable, just-right sweetness. Flavour, appearance and taste equate to success, growth and health, so it’s crucial to get each component perfect. It can feel overwhelming to keep every part of your business running well, but there is a recipe for success. Measuring KPIs is the core way to get a departmental view of every area of your company, showing you problem or perfect areas. Here’s how to measure your KPIs, to make sure you’re not doing a blind bake.
Key performance indicator (KPI) measurement is our favourite – and the best – way of keeping on top of business. You can manage both your financial and non-financial data in a simple way – something we could never have dreamt of in the days of spreadsheets. They enable you to measure your team’s performance, and therefore how your business is doing. This brings a sense of shared accountability, therefore informing your team as to where they need to improve. You can pull this data for performance reviews, which will make things simpler along the line, raising efficiency for managers. Measuring your KPIs is key to running your business, so here’s how to measure them to get the most out of them.
You know your business inside out, and measuring KPIs is going to help you dig even deeper into it. Departmental KPI measurement will show you how each part of your business is performing, so you can look over each part with clear results. It’s a good idea to keep each department separate in your measurement, as you can look at each one individually, drilling down further into the data.
Get your metrics on the scales
Every business is unique. While some KPIs (like cost of goods sold, for example) will be suitable for many companies, when you’re selecting your own KPIs you must look internally. There’s no sense in using metrics that aren’t completely relevant, as you could find they don’t actually help – they might hinder instead. You’d be wasting your time measuring KPIs that aren’t tailored to you.
The first thing to do is to think of your main goals. It’ll be tricky to narrow this down, but bear with it. This practice will help you to recognise the path you need to follow. Once you’ve done this, think SMART. You certainly need to be clever with your selections, but ‘SMART’ actually stands for the following:
- Are they Specific to your objective?
- Can you Measure your progress towards your goals?
- Is your goal Attainable?
- Are they Relevant to your business goals?
- What’s the Timeframe for achieving your goal?
Keeping this check list in mind is going to help you stay on track, and you’ll find you can become more selective with the metrics you measure.
Next, you need to assign numerical values to each of your KPIs. As mentioned above, non-financial data can be measured in this way. So, for example, let’s say you want to measure your customers’ satisfaction. You can ask your customers if they’re satisfied, perhaps using a feedback survey. Give each answer option a number and you can easily turn this non-financial data into financial.
It’s essential to work out a timeframe too. If you’re not keeping to your timeframe, you’ll undermine all the work you’ve done getting your KPIs ready.
Into the baking tin… Get your KPIs in your dashboard
In FUTRLI, you’ll see there are a few options for different types of card within your dashboard. We’re going to focus on the two best KPI measuring cards, so you can get straight on with it.
The Snapshot card
This card can display up to five metrics. When you’re tracking your KPIs, this one is the best way to get a quick view of the information you need. It can show you…
- Revenue for the current period up until today
- The forecast for revenue for the month up until today
- How you are performing against your forecast target
- How you are performing today in comparison to last month for the same period
- How you are performing today in comparison to last year for the same period
Measuring KPIs means you can watch your business rise to success
The Report card
You must monitor your report card regularly for it to be effective. Giving you insight across your business, their flexibility allows you to view any account, category, account group, non-financial data, formula (KPIs), historical and future periods for actual and/or forecast data over tailored periods.
Drill into the KPIs with the formula builder. It’ll allow you to assess a variety of key measures such as ROI, wage %s, productivity, and more. Because FUTRLI is so user-friendly, the KPIs you choose or your business can then be applied in dashboards or scenarios. We’ve ensured you can create dashboards for your departments, or see a full overview.
Set your timer: Alerts
If you find yourself short on time, there’s an easy way of keeping track of your KPIs. While we would advise you check your dashboards a few times a week, there is another way. The alerts feature allows you to monitor your business’ activity 24/7. Every business operates in its own way, and while some operate 9-5, others are buzzing all night across the globe. So, there are a few alerts which will give you a helping hand which we’ll briefly sum up here:
KPI alerts: create formula and KPI alerts to stay abreast of changes in key metrics, such as Gross Profit or Wages to Sales.
Set warning thresholds: get notified before alerts trigger with warning thresholds which inform when a limit or target is close to occurring.
Predictive alerts: combine actual and forecast data to determine whether a trigger would be hit in the future based upon current performance.
Alerts can come in two ways: in-app notifications, or via personal email. Choose which is most convenient for you, and you’ll find you have a load of stress off your shoulders.
Out of the oven: the end results…
This is the longest part of the KPI measurement process. To make your results meaningful, you need to give them a bit of time to come into effect. Once you’ve got results for a couple of periods, you need to be monitoring the results and comparing them in your forecast. This will keep your business on the right track to achieving your goals.
Now you can work out your averages and compare your results. The alerts feature can tell you when you’re not meeting targets too, so you can get back to running your business the way you want to.
But, a word of warning: if you ignore your KPI reports in between setting and reviewing targets, the entire process becomes redundant. The whole point of KPIs is to help you steer progress and success, so use them to their optimum.