Today businesses and financiers are demanding more effective performance measuring systems that will not only enhance their performance levels, but also give them that all important competitive edge.
The traditional statement of financial performance, statement of assets and liabilities, and so on, is great for providing the financial information. But what they don’t do is link operational performance to the business’s strategic objectives.
Performance needs to be judged against objective criteria.
They tell businesses, amongst other things:
- How well they provide services
- How long they take to process customer requests
- Their product delivery performance
- How much time they spend fixing mistakes.
Investors are demanding to know that management strategies are creating value and business people need the appropriate tools to accurately measure performance in the critical areas of profitability and return on net assets. The financials alone are not enough to effectively manage businesses that are seeking to survive and add shareholder and owner value.
KPIs are a way to broaden what businesses measure.
Most small businesses would benefit from improving performance measurement standards, and while there are differing views on how this should be achieved, one point is clear. No single measure can provide a clear picture of a business. The complexity of managing a business today requires managers to be able to view performance in several areas.
Understanding Key Performance Indicators will greatly assist in finding out the financial health of your business, identify the critical strengths and weaknesses and evaluate the impact of future business strategies.
www.astillhawke.co.nz
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