Key Performance Indicators Are Effective Tools For Businesses | CPA in Baton Rouge

What is a key performance indicator (KPI)? KPI refers to a set of quantitative measurements used to gauge a business’s long-term performance. They are used to measure progress towards substantial goals like driving down overhead, increasing revenue by a certain percentage in a year, or improving customer retention rates.

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In order to grow your business, you must measure your progress. KPIs can help your evaluate the specific areas of your business where you can improve, and see where you’re already succeeding. 

Types of KPIs

Depending on what area of business they affect, KPIs can be organized into several different types. There are five categories. 

• Inputs: The resources used in constructing outputs (see below). For example, input KPIs might consist of the paper used in your office printers and the cost of electricity to power the computers. 
• Process: Also known as “activity,” which measures the processes used in constructing outputs (see below). When working on a specific project, this could refer to the amount of time spent with the customer or the amount of people involved.
• Outputs: The measurements of the amount of work done and what was constructed. Outputs result in tangible products or hard data in most businesses.
• Outcomes: These KPIs focus on accomplishments and impacts, making them a little more abstract. Two outcome KPIs every business can benefit from are customer satisfaction and positive retention rates. 
• Project: These KPIs are meant to answer questions related to milestone progress towards important initiatives. Adding a certain amount of new customers via a marketing campaign is an example of a project KPI. 

How Can I Use KPIs in My Business?

KPIs do not need to be tied to financial data, which is one important thing to keep in mind. If you would like to improve a business’ relationship with their customers and community, outcome and project KPIs can help.

Through the smart use of KPIs, every aspect of business can be analyzed and improved. It is an easy process to establish them:

• Write a clear goal for your KPI: Make sure the goal is strategic, otherwise it will not translate into tangible outcomes. Also, tie the goal to a key business objective. This should be something integral to the organization’s success. 
• Share the new KPIs with employees: Not only should you explain what the goal they will be working towards is, but also why they are working towards it. Someone on staff may even have an idea to improve the goal. 
• Regularly review your KPIs: In order to track progress, use records and hard numbers. If a process KPI is set to add another employee in order to complete a project faster, the rate of the project should be compared before and after the goal is introduced.
• Evolve your KPIs as needed: You should fine tune your goals or change direction entirely if the results fall short of your expectations. This change may bring a new and more efficient way of getting to the same result.

In order to get your business where you want it to be, KPIs are essential tools. Being so easy to define and act upon, they are reliable ways to track progress.

Want to learn more about how KPIs can help you grow your business? Contact our experienced accountants in Baton Rouge, LA today!