Financial and Non Financial KPIs
Reflecting on performance is one of the most important ways to influence the success of your (or your clients’) business. With key performance indicators, you can reflect on an organization’s success and map future strategy from an informed position.
Both financial and non financial KPIs come into play when making a thorough assessment of progress. So what is the purpose of these KPIs?
Key Performance Indicators: An Overview
Key performance indicators provide a crystal clear way to measure performance in the most important areas of the business.
In any business setup, plenty of data and variables typically flow in from different angles. With all the data to follow, important financial metrics like sales, revenue collection, and expenses can be difficult to keep tabs on.
Not to mention the subjective elements like brand recognition or customer satisfaction.
This is why performance indicators are the best way to keep an eye on your clients’ or business’ efforts. They help you see the bigger picture so you can stir the business in the right direction.
When you monitor indicators regularly, you can make changes that will breathe life into business faster
Financial Key Performance Indicators
Financial key performance indicators focus on crunching the numbers to help you visualise how the business is doing from a financial standpoint. They are typically based on gaining insights from the financials like the income statement, balance sheet, cash flow statements etc.
Non-financial KPIs explore all the other areas that don’t fall within the purview of the financial statements. These measures directly impact the health of the business are therefore as important as their financial counterparts.
Here we talk about measures such as market share or brand recognition, employees and supply chain issues, among others.
How to Develop Key Performance Indicators
Coming up with an organization’s key performance indicators involves analyzing the business’s vision, mission, objective, and goals. By so doing, you can get a picture of the key drivers and main activities at the heart of the company.
Once you determine the main fundamental strategic drivers, these become the variables that underpin the key performance indicators.
Performance measures are usually industry-specific. What’s considered ‘key’ in one business sector may not have the same impact in another. For instance, in the creative industry, you would focus on critical indicators like the upsell rate.
On the other hand, upsell rate won’t have much relevance in an oil and gas setup. Instead, benchmarks like exploration success may be of more value to oil and gas companies.
Depending on the nature of business, it’s important to determine the right metrics to set your sights on. If you use the wrong metrics, you will be out of tune with the business needs, which can easily lead to failure.
Remember, it’s not enough to use benchmarks based on peers. Instead, key performance indicators should reflect each organization’s unique circumstances.
What Are the Benefits of Using Key Performance Indicators?
Key performance indicators are critical for monitoring trends to provide context to financial reports. They help align organizational goals to the overall strategy and provide an effective way to measure results.
In addition, performance indicators cut the time that business people, especially non-financial managers, will spend evaluating business performance. Therefore, it is an effective way for managers to take stock of how the business performs rather than simply measuring top and bottom-line success.
Both financial and non-financial KPIs are equally important. If you focus only on one side of the equation, you will get an uneven view of business that can steer your strategy in the wrong direction.
It’s important to note that how you communicate KPIs is as important as choosing the right ones.
Whether you are evaluating your own business or advising a client, KPIs need to be clear as day to send the right message. This means all KPIs must be communicated with precision.
Let’s look at some guidelines for effective KPI reporting.
- Stick to the most relevant indicators. You can collect and measure data on as many metrics as you may think off. However, if you endeavour to present too many indicators at once, it will lead to more confusion than clarity.
- Create appealing presentations. Your presentations need to include the best performance indicators plus supporting information in an easy to read manner. If presentations aren’t easy on the eyes, they tend to confuse readers, which misses the point of a thorough evaluation.
- Add context. Key performance indicators send a clearer message if supported by contextual text showing how they link to strategy and benchmark standards. Without this context, your readers will have difficulty interpreting the stats, especially if you are acting in an advisory capacity.
- Your KPIs should remain relevant. As the business grows, key performance indicators may also change with time—that’s why a rigid approach is not a good fit to evaluate business performance. Adjust your KPIs to consider performance indicators that are “key” at each new stage of the business’ growth.
Using Key Performance Indicators to Evaluate Business Success
Tracking KPIs for your own business or a clients’ organization can make the difference between success and failure. Done right, monitoring KPIs has the potential to catapult your business into the next level of growth or, at the very least, keep it afloat for longer.
However, if tracking KPIs take too much time and attention, it may be too cumbersome to yield any benefits. Plus, keeping your finger on the pulse of all your clients’ may prove difficult, if not impossible.
You need a system that can handle your KPI reporting effectively.
With AVA, you can:
- Display all your client KPIs, not just the quantitative financial indicators, on one easy-to-view dashboard. You can track all your clients in one go without the tedious business of opening and closing several files.
- Select and display only the financial KPIs when you need to focus on crunching the numbers.
- Present information to your clients in eye-catching yet straightforward reports.
- Show insights to give your KPIs context. When indicators are combined with forecasts and context, you can confidently advise your clients without breaking a sweat.
There’s no doubt AVA is just the right tool for you or your clients to evaluate business performance and make decisions quickly and easily.
If you’re not yet on board, don’t wait any longer. Sign up today to streamline your KPI reporting and launch your business on the right trajectory.