{"id":2408,"date":"2022-05-17T09:05:19","date_gmt":"2022-05-16T23:05:19","guid":{"rendered":"https:\/\/www.asapfinance.com.au\/?p=2408"},"modified":"2022-06-23T15:55:57","modified_gmt":"2022-06-23T05:55:57","slug":"business-tips-setting-kpis-and-measuring-performance","status":"publish","type":"post","link":"https:\/\/www.asapfinance.com.au\/ru\/en\/business-tips-setting-kpis-and-measuring-performance\/","title":{"rendered":"Business Tips: Setting KPIs and measuring performance"},"content":{"rendered":"

Once you begin trading, you\u2019re faced with a new challenge \u2013 successfully managing the course of your brand-new business and making sure it\u2019s a profitable enterprise.<\/p>\n

It\u2019s easier to manage your startup\u2019s sales and finances when you have access to the best possible information and data about your performance. Tracking specific metrics and key performance indicators (KPIs) allows you to see how you’re performing against your targets \u2013 so you can take action to improve performance, sales, growth and profitability.<\/p>\n

But which KPIs should you be tracking?<\/p>\n

Sales and conversion rates<\/strong><\/p>\n

An obvious metric to track is the number of sales you\u2019re making each month. You\u2019ll have set a target for these sales in your business plan, so it\u2019s important to record each sale and see how the startup is performing over the first six months of the business.<\/p>\n

It\u2019s also important to log and track the drivers that lead to these sales. How many sales enquiries are you receiving? How many of these enquiries are being converted into actual sales? How many customers are being engaged by your marketing campaigns, and is this engagement leading to interest in your products and\/or services.<\/p>\n

The more detail you can track from your sales and marketing activity, the more forensic you can get with which campaigns are actually delivering the goods.<\/p>\n

Sales revenue and other revenues<\/strong><\/p>\n

When customers buy your goods, that creates income (or revenue) for the business. Ultimately, no business can succeed unless it\u2019s generating enough revenue to keep the wheels turning in the business. So, tracking your sales revenue is a vital measure of your financial health.Tracking your various revenue streams over time keeps you in control of your finances and helps you make the right decisions. You can track performance against your revenue targets. You can forecast how much working capital you\u2019ll have at a future point in time. And you can see if there\u2019s enough cash in the bank to fund your projects and growth plans.<\/p>\n

Cashflow and ongoing cash position<\/strong><\/p>\n

Good cashflow management is all about balancing the process of cash coming INTO the business and cash going OUT if the business. Recording and tracking your cash position is easy to do with the latest cloud accounting software and cashflow apps, so there\u2019s no excuse for not tracking your cash position.<\/p>\n

Ideally, you want the business to be in a positive cashflow position (with more cash coming in, than going out). But to achieve this, it\u2019s helpful to see these cash inflows and outflows in real-time. With up-to-date metrics on your cashflow position, you can make informed decisions about spending, payment of bills and where additional cash and funding may be needed.<\/p>\n

Debtor days and aged debt<\/strong><\/p>\n

When customers fail to pay your invoice on time, that creates an aged debt \u2013 money that you SHOULD have received but which the customer has yet to pay. An aged debtor report shows you which invoices are unpaid, which customers haven\u2019t paid, and the total size of this debt.<\/p>\n

Your debtor days number is a metric that shows the average number of days it takes your customers to pay you. Anything above 45 days is bad news, so you want to aim to keep this number between 14 to 30 days, if possible. A large amount of aged debt will leave a hole in your cashflow \u2013 and that can quickly start to impact on the day-to-day running of the business.<\/p>\n

Gross profit margin<\/strong><\/p>\n

Generating a profit is crucial to the continued success of your startup. Having metrics to measure your profitability is an important part of managing your finances.<\/p>\n

One common way to do this is to track your gross profit margin. This metric shows the amount of profit made BEFORE you deduct things like overheads and the cost of goods sold (COGS), shown as a percentage. The formula for calculating your gross profit margin looks like this:<\/p>\n

Gross Profit Margin = Gross Revenue minus COGS, divided by Net Revenue, multiplied by 100<\/p>\n