Tips for Leveraging KPIs That Drive Business Growth

As a company matures and the business environment shifts, it’s critical to formalize key performance indicators (KPIs).

This benchmarking tool should reflect a company’s and/or individual department’s goals, and include metrics that are quantifiable and actionable.

Oftentimes, internal challenges and conflicts prevent businesses from effectively tracking KPIs, including: lack of alignment among internal groups, disagreement on what is most important, and lack of accountability and ownership.

It’s vital for overall KPIs to be established in which department-specific KPIs are aligned and tracked — because when tracked correctly, KPIs allow your COOs, CFOs, finance and operations teams to see which areas of business need the most improvement.

While there are numerous financial and operational factors that can be viewed as KPIs, they can fall into several buckets based on circumstances unique to industry and specific business within that industry.

10 Critical KPIs Every Operations & Finance Team Should Be Tracking

1. Procurement KPIs

• Average days to close contracts
• Total negotiated savings
• Total realized savings
• Total managed spend

2. Shipping KPIs

• Average days to ship
• Average shipping revenue/costs

3. Revenue KPIs

• Product mix percentage
• Month-over-month growth
• Year-over-year growth
• Revenue per FTE

4. Collections KPIs

• Days sales outstanding
• Average age of receivables
• Collection success ratio
• Number of calls per hour

5. Customer Acquisition KPIs

• Total cost of acquisition
• Average cost of acquisition
• Month-over-month acquisition growth

6. Orders KPIs

• Average order value
• Order success rate
• Labor hours
• Product returns

7. IT Response Time KPIs

• Average response time
• Average time to resolution
• Number of outstanding tickets
• Average age of outstanding tickets

8. Inventory Management KPIs

• Days sales in inventory
• Average inventory value
• Inventory turnover ratio

9. Working Capital KPIs

• Cash flow targets
• Working capital ratio
• Leverage ratio
• Current ratio

10. Other KPIs

• Staff turnover
• Training

KPI Reporting & Beyond

While this list is a good start, there’s no magic formula to choosing the proper KPIs. They can be as simple as measuring your monthly cash balance and A/R balance to more complex items like response times.

What will truly provide insight is when you conduct KPI reporting, which can take the form of written weekly activity reports, spreadsheets, charts or some other numbers-based scorecard.

Better yet, a custom dashboard tool is commonly used for execs to track real-time data. Dashboards can be built as a custom software application or purchased as a web-based subscription.  

What matters most is that you keep the KPI simple enough to track and consistent enough to manage.

Whatever your KPI and reporting needs, our team at Bridgepoint brings value to companies by creating alignment among management teams and helping them hammer out the top priorities and measurement devices to meet company goals.