How to define a Key Performance Indicator - AccountingX

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October 11 2017

How to define a Key Performance Indicator

 

A Key Performance Indicator (KPI) is a quantifiable measure that demonstrates how productively a company is achieving their key operational goals. Organizations use KPIs to calculate their success at hitting business targets. In their most distilled form, KPIs are a form of communication. If they are created properly, they are an indispensable tool for assessing a business and optimizing its efficiency.

 

 

Defining your Business Key Performance Indicators

 

Defining a KPI for your unique business can be extremely challenging. Your business should have both high-level and low-level KPIs. A high-level KPI will reflect the company’s overarching visions while low-level KPIs tend to be more specific. For instance, a high-level KPI could evaluate overall performance and a low-level KPI may analyze the quantity of your business’ new customers. One way to assess whether or not a KPI will work for your business is to use the SMART criteria. The famous SMART acronym was first published in 1981 in a paper called “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives” by George T. Doranin. SMART stands for Specific, Measurable, Assignable, Realistic, and Time-related. If your Business Key Performance Indicator meets the SMART criteria, the likelihood of it having a positive effect on your business skyrockets. Due to delicate nature of KPIs, many successful companies have an accountant handle the complicated process. An accountant will be able to understand the organizational objectives of your business and create a set of directives to ensure success.

 

Optimize Your KPIs with a Professional Eye

 

In recent years, KPI’s have fallen out of vogue as a result of poor implementation. However, for the businesses who have perfected the art, they will never cease to be trendy. When used properly, KPIs can be a wellspring of vital information about your business. Too often, businesses try to use industry-recognized KPIs without success because the KPIs do not accurately reflect their particular company. This is why having have an accountant provide you with this information could save you endless headaches, time, and money. An accountant will have the ability to logically design a Business Key Performance Indicator so that it accurately suits the needs of your business. Even more importantly, an accountant will be able to present the findings of the KPIs in a concise and relevant package, guaranteeing that your business will be able to immediately integrate the information gleaned from the KPI.

 

For more information on how you can have KPIs integrated with your business contact us today!

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