Management + Systems

By Ian Robertson, sales and marketing director, BrightBridge

Key performance indicators (KPIs) are a vital tool for any business seeking to succeed through expansion. Offering valuable insight into a company’s strengths and weaknesses, they can help identify areas in need of improvement, thus driving strategic growth via informed decision making. 

When it comes to the ‘bigger picture’, tracking KPIs can help to promote transparency around how a business functions – on an operational and financial level, and beyond. This article explores KPIs in more depth and highlights the KPIs that businesses should consider tracking when striving for bigger and better things.

Setting KPIs that align with business goals

Though it may seem a daunting task, it’s crucial to align KPIs with goals and objectives from as early on as possible. When setting KPIs, be sure to get down to the specifics; if the goal is to increase revenue for example, then revenue growth would be a KPI to track. If the aim is to improve customer satisfaction, then customer satisfaction would join that list, and so on. Another crucial aspect to consider when selecting KPIs is the unique needs and characteristics of the business. For instance, for a high volume, high-quality manufacturing operation, it’s essential to track KPIs that measure production efficiency and quality, such as machine utilisation, cycle time and scrap rate. Armed with the laser-focused insight gained from KPIs specific to the business, you’ll more than likely start to see progress on the journey to growth. 

Financial KPIs

Providing a clear picture of the financial health of a business, financial KPIs can help to facilitate expansion on a grander scale. These include highlighting potential areas of revenue growth, as well as gross margin and operating income. Signalling the increase or decrease in income over time, revenue growth is a good indicator of a business’s success and whether revenue goals are being met. A positive growth rate shows a business is expanding and reaching more customers, while a negative growth rate may indicate the need to re-evaluate strategies.

A gross margin KPI specifies the profit left after deducting the cost of goods sold and provides an accurate indicator of a business’s pricing strategy – and crucially, whether the gross margin targets are being met. A high gross margin would indicate a significant profit for instance, while a low gross margin would suggest re-evaluating the current pricing strategy. Similarly with operating income, this confirms the profit made after deducting all operating expenses, and can help businesses gauge how well they are managing expenses. A high operating income would suggest a more efficient operation in this sense, while a low operating income may result in the subsequent re-evaluation of those expenses.

Operational KPIs

Operational KPIs provide insight into the efficiency and effectiveness of business operations, with a more concrete understanding of how well a business is performing. Regularly monitoring these KPIs is essential for businesses seeking to grow, especially in the fasteners and fixings industry where customers demand high levels of quality and swift delivery times. For this reason, operational KPIs such as inventory turnover, on-time delivery rates, and customer satisfaction, are crucial to track at all times.

A KPI such as inventory turnover for example measures the rate at which an inventory is sold and replaced over a given period, helping a business manage its inventory more effectively. A high inventory turnover indicates efficient selling and restocking, while a low inventory turnover may be due to potential issues with product demand or overstocking. When it comes to exceeding the needs of customers, the on-time delivery rate measures the percentage of orders delivered on or before the promised delivery date. This can prove a key indicator of how well a business is managing logistics, and when acted on successfully can help tackle supplier lead time issues and drive customer satisfaction as a result. As one of the most crucial operational KPIs, customer satisfaction arms businesses with that very knowledge – whether they are meeting the needs and expectations of customers, from providing quality products and services to championing positive customer experiences.

How Cloud ERP can elevate KPIs

Implementing the right technology such as an Enterprise Resource Planning (ERP) solution to help track KPIs can prove a game changer on the path to growth. Supporting businesses with the management and automation of core processes – such as finance, accounting, inventory management and more – Cloud ERP enables businesses to track and analyse their KPIs in dashboards more effectively than disparate spreadsheets; providing ‘real time’ data, actionable insights and the ability to automate routine tasks.

One of the primary advantages of using an ERP system such as Oracle NetSuite in manufacturing and retail includes the centralisation of all business data. This provides businesses with the swifter access and analysis of the intel required to track their KPIs. Integrated software also bolsters businesses with forecasting and automation capabilities. Through harnessing ‘real time’ data for instance, an ERP system can help businesses forecast the demand for their products or services, allowing them to better plan for the future.

In addition, the automation of time-sapping accounting and inventory count tasks can further aid businesses in freeing up time for growth related activities – minus the headcount. 

For large and small businesses eager to drive growth, tracking the relevant KPIs can help to equip leaders with a greater understanding of financial and operational performance – making it easier to identify areas for improvement. With the adoption of an integrated ERP solution, the process of analysing KPIs can be further streamlined and more easily acted upon so you can take your business wherever you want.