Show me the Money!

When building a set of reports for a business, the first critical step is defining the right KPIs aka key performance indicators.

It’s tempting to measure everything in dollars. After all, business is about making profit, and your accounting system already has all the numbers ready to go. No conversions, no extra effort just plug in and build the dashboard. No need to mess around with units of measurement. Simple, right?

I’ve got two issues with that.

First, there are already some excellent off-the-shelf options for financial reporting. Xero’s built-in tools are decent. Spotlight Reporting is slick and plugs right in. Before spending a lot of money building something custom, it’s worth getting familiar with what’s already available, you might find it’s more than enough.

Second, and far more importantly in my opinion. Many people in your business have no control on the prices of raw materials or finished goods. If these prices fluctuate, your dollar-based KPIs can end up reflecting market conditions rather than actual business performance. Worse still, they don’t give you much insight into how specific teams are performing.

Maybe the right KPI is tonnes per hour. Maybe it’s daily weight gain per head. Maybe it’s not about your core product at all, perhaps tracking waste (or the lack of it) tells you more about what’s really happening. Defining KPIs is about understanding what drives your business forward, and then measuring what needs to change. Once you're tracking those drivers consistently, you’ll quickly learn which changes help and which hurt.

If your industry shares data and you’ve got benchmarks to work with, industry-standard KPIs can be valuable. But don’t feel like you have to give up your own bespoke measures. Often, you can have both, as long as your data supports it.

Ideally, this all sits within a systemised, automated process. Because clean, accurate, and timely data is essential. If you can’t trust the raw data, you’ll never trust the KPI.

Want help defining KPIs that actually drive performance? Get in touch, I’d love to help.