What are the benefits of Key Performance Indicators in business?

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Setting Key Performance Indicators (KPIs) will help with measuring the growth and development of a commercial enterprise. KPIs compare performance against targets, providing information about how or why those targets are met.

Benefits of introducing KPIs

A Key Performance Indicator can help you to monitor your company’s performance, where it may be doing well, and areas that are falling short of expectations. You may want to produce an updated business plan and set new targets for growth, which will be helped by the introduction of KPIs. The data will indicate areas that are stronger than others, or where change is required. Comparison to other companies in your sector will indicate where your strengths lie, and identify whether or not improvement is required to reach the industry standard.

What can you measure using KPIs?

You can measure performance in all areas of a business, not just financials. You could measure your customer database, perhaps how many customers you have and how many are actively trading with you. Customer service is a popular area for KPIs to be set, as it can influence trade and sales. Set a KPI to measure complaints, how long a customer waits to be seen by you or for the phone to be answered. KPIs can also be used to measure staff performance levels, including sick absence, quality of work and employee engagement.

Choose your KPIs

Link your KPIs to the target goals of your company, so that they are achievable and can be changed if necessary. A KPI should be linked to an area of the business that can be controlled, which makes them more achievable and realistic. A meaningful KPI will indicate when there is a potential problem. For instance, if a KPI is set to measure the processing of forms on a daily basis, you may want to set the target at dealing with each form within three days. If the KPI is achieved steadily and then begins to slip, you will know to look at the potential cause of the decline in productivity. You may be able to work together with management accountants to set achievable and meaningful KPIs for your company.

Be SMART

A performance target based on a KPI will help you to deliver growth in your company, perhaps by making changes where required. All targets you set should be Specific, Measurable, Achievable, Realistic and Time-bound (SMART).

Is your company using KPIs? Let us know if you have managed to make positive changes through this method.