What reporting KPIs do you need to grow your business?
Of course, key performance indicators (KPIs) differ from one company to the next. Yet, you cannot grow your agency if you do not rely on numbers.
These numbers can provide a wealth of information to you, including providing you where you are right now and where you are headed in the short term. They can also serve as a benchmark to help you make improvements.
However, the hard part for many organizations is knowing what to track and how to do it.
Why It’s Important to Use the Right Reporting KPIs
As a business owner, it is critical to track numbers, but not just any numbers. You need to know the right reporting KPIs to track.
The right information will help you to know how to grow your business. Because a KPI report will provide you with a clear picture of your organizational performance and growth potential, it is critical to be able to monitor them over time.
Knowing which reporting KPIs to track helps make building reports easy to do. It allows you to forecast and measure progress over time, providing tangible information you can use to grow your company.
Reporting KPIs You Should Be Tracking
As a business, it’s critical to consider your own goals and objectives because they heavily influence the types of KPIs you should be tracking.
However, there are some general numbers every agency should follow on a consistent basis.
Cash Flow
Cash flow is a critical number. It tells you how much money is flowing in and out of the business. When you have a healthy cash flow, that means you have ample money available to handle any type of need, including unexpected expenses. This also helps indicate if your business is healthy and in good overall condition.
It’s important to monitor cash flow on a monthly basis. In some businesses, especially high transaction businesses, monitoring cash flow on a weekly basis is better.
Accounts Receivable Days
You know how much you have in accounts receivable – funds that have yet to be paid by your customers and clients. Look a bit deeper at the accounts receivable days, which measure the number of days it takes for your business to collect cash. The faster you collect cash, the better your business is able to operate. This also helps you improve cash flow.
To improve this metric, you need to shorten the number of days it takes you to collect payments. So, how do you do that?
- Send invoices to your clients on time to encourage faster payments
- Implement payment terms to encourage earlier payments
- Make the payment process as easy as possible for the client
- Automate the invoice system to minimize mistakes and delays
Gross Profit Margin
The gross profit margin is an excellent KPI to track because it provides a way to measure your company’s profitability.
This KPI takes into account your revenue and then subtracts the cost of goods sold from that. This simple figure is an essential number to know. It’s an indicator of profit within your business and can tell you if you need to adjust your pricing.
Monthly Recurring Revenue (MRR)
Yet another KPI to focus on is your MRR. It is the value of the monthly contracts your agency controls. There are three types of MRR that can give you key information:
- New MRR: This depicts the number of new customers you have signing up with you.
- Expansion MRR: This figure is the number of current customers you have that have upgraded packages.
- Churned MRR: This is a figure you want to see as low as possible as it indicates the number of customers that have downgraded the services they are using or that you’ve lost customers.
When you keep track of these areas, you can see what’s working for your business and which areas need some help to get you back to a profitable level.
Client Lifetime Value (CLV)
Client lifetime value measures how much you can expect to earn from each of your clients through the entire relationship you have with them. It helps you to understand the value of each customer.
It is typically one of the most important metrics to extend because of how much information this provides about how your business is running. When you monitor and see a positive CLV, that indicates you are making better decisions with your marketing and producing better overall results.
An Experienced Accountant Can Help You Select the Right Reporting KPIs
The right reporting KPIs define what information you are paying attention to within your business. If you do not focus on the proper figures, you may miss key indicators of a problem.
On the other hand, using these properly allows you to drive success within your organization since they can provide you with specific steps to create improvement.Pasquesi Partners can help you. Allow our team to help you choose the right KPIs and help you determine where you can see improvement. Contact us today to learn how we can help you drive your business forward.