THE IMPORTANCE OF TRACKING NON-FINANCIAL KPI s

ness as a numbers game, but the health of your business goes beyond your headline financials. While revenue, profi t and loss are all key measures of a business’s success, non-financial KPIs can be equally important in seeing the full picture of the business.

FINANCIAL VS NON-FINANCIAL KPI s

Financial and non-financial KPIs look at different sides of your business’s overall performance. Financial KPIs focus on tangible elements such as monetary values and are a backward-looking metric focussed on historic data. On the fl ipside, non-fi nancial KPIs tend to be forward looking, providing context to your financial information.

As an example, if your revenue dropped significantly, your non-financial KPIs can provide the why. Did your reputation take a hit? Have you lost key relationships with your customer base? Non-fi nancial KPIs fill in the gaps and help to predict outcomes from your business activity.

Your non-fi nancial KPIs are also more likely to be aligned with your wider business strategy. Your values and purpose are unlikely to be solely finance based. If your goal is to run a sustainable business, revenue won’t be a good indicator of this. Instead, you’ll need to track metrics such as carbon footprint, energy consumption or supply chain miles.

WHAT NON-FINANCIAL KPI s SHOULD YOU BE TRACKING?

The KPIs that you track will depend hugely on your business and its overall strategy. Essentially, anything that provides valuable information to help your business reach its goal is something that you should be tracking.

Common areas that provide valuable insights include:

1Teams

Your people are your most valuable asset so ensuring that they are happy and engaged is vital. Staff turnover and satisfaction can inform your people strategy moving forwards. If your turnover is high and information gathered through satisfaction surveys shows that morale is low then you know the area you need to work on to keep your teams engaged.

2 Customers

How you measure the success of your relationships with your customers will depend on the context of your business. If you aim for long-lasting relationships, then keeping track of customer retention will be key.

If your business works primarily on word of mouth, then keeping track of how new customers find you (particularly whether this has been a referral) may be where you want to focus your time.

3 Effi ciency

How well your processes are running can have a big impact on your bottom line. If your revenue is dropping this can often be the missing piece of the puzzle.

How many overdue projects do you have? How many deadlines have been missed? What is the lead time for your existing customers, and can this be improved?

The main reason that non-financial KPIs are neglected by business owners is that they can feel hard to measure but this has become much easier in the digital age.

If you want to discuss the main KPIs you should be tracking, get in touch.

www.hwca.com/accountants-esher

T: 020 8549 5137

E: esher@hwca.com

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