What are KPI’s?

KPI’s are Key Performance Indicators. They are used to measure the success of a business.

Isn’t that the same as a profit and loss account?

No a profit and loss account measures the profitability of a business for a specific period – a year, 6 months, 3 months, or even 1 month.  KPI’s tend to look at a particular area that is important to the business owner, such as sales levels or orders taken.

Do they always relate to financial information?

No, they can be about anything which can be measured which shows success or not, such as number of complaints or website hits.

How often are they measured?

As often as necessary, often daily or weekly.  A key element is to get information which is timely and accurate, thus enabling the business to act quickly in cases where things aren’t going to plan.  For instance, if you know you reach break even when you achieve sales of £X, it may affect how you price or promote afterwards.

What should I measure?

Anything you like!  The key is to get information about your business which is useful, can help you make decisions or take action.  It should also be economical to collect – in other words, the benefit of having the information should outweigh any cost of collecting and analysing it.  Common KPI’s include:

• Sales (£ and units)
• Orders received
• Debtor levels (via various sources – salesperson, telephone, internet)
• Cash collected
• Website visits/clicks
• Cost levels
• Production and stock levels