KPIs, or key performance indicators, are critical measures of a company’s successes and shortcomings. Setting up a few specific, metrics-based KPIs makes managing a business significantly more straightforward and helps you create success in the achievement of your business goals. As a business owner or manager, you’ll have a clear picture of the company’s operational and financial performance, which can help you identify where and how you need to change your day-to-day practices. For small businesses, outsourced accounting services can help you create some of these key performance indicators, make crucial financial goals and decisions, and set your company up for continuing success and expansion.
Setting goals is a critical process in strategizing for the future of your business, whether it’s a start-up with five employees or a thousand-person enterprise. As a business owner, you need a plan that sets a destination for your business in the next few months and years. This necessary goal-setting process includes everything from the general desire to increase revenue and cash flow to the intentions for a new product you’re launching. Once you have your company’s goals on paper, you can identify areas for improvement and optimization. Outsourced accounting services work with business owners to create goals centered around profits and revenue, inventory management, and overhead burn.
Determining your company’s KPIs and overall goals might seem like a daunting task at first, but dedicating the time to set these objectives on a monthly, quarterly, or annual basis is an essential step in tuning up your business and moving its infrastructure forward to continuing achieving more profitable outcomes. The nature of these KPIs and company goals varies significantly depending on your industry, which means you’ll want an outsourced accountant on your side who has experience in working with businesses that are similar to your own. Let’s cover some of the key performance indicators that your accounting services provider can assist you in creating so that you’ll always have a strategy for the financial future of your business.
Key Performance Indicators
1. Operating Cash Flow
Operating cash flow, or OCF, is a measure of how much money your business brings in as a result of its normal operations and sales. A reasonable level of operating cash flow ensures that your business operates in a healthy manner and whether or not there is current potential for increasing the company’s size and outreach. Net income is a portion of the measurable operating cash flow. At the same time, non-cash items are frequently added into the total better to understand the value of the company’s total assets.
Understanding operating cash flow for your business is key to maintaining profitable operations. Setting up KPIs to track this metric is essential if you aren’t setting goals related to your business’s cash flow. When you bring on a new outsourced accountant, this statistic is one of the first items on the list necessary for creating a new financial strategy.
2. Burn Rate
Tracking your business’s burn rate means getting a clear picture of how much your company is spending on a monthly, quarterly, and annual basis. In conjunction with cash flow, this statistic helps business owners identify the relative safety of their current operations and make decisions in regard to future investment. The overall complexity of the business’s burn rates depends considerably on the current investments of the company. It offers a significantly more in-depth look at the financial status of the business than your net profit and revenue numbers.
3. Current Accounts Receivable
A company’s accounts receivable is a straightforward measure of the amount of money that’s owed to the company, but as of yet, has not been paid by the customer or consumer. It’s an important statistic in discussing the liquidity of the company’s assets because while the accounts receivable often have a high value to the business, its total isn’t immediately retrievable in the event that the business needs to access its financial value.
4. Accounts Payable
The company’s total debts, including how much it owes to its customers, employees, and investors, are crucial considerations in determining its financial safety and current risks. Your business might owe money to various creditors; this is always a normal state of affairs. However, when your accounts payable totals towards your accounts receivable, your company stands in a riskier financial position that often isn’t very sustainable.
5. Inventory Turnover
Measuring your company’s ability to generate sales and restock inventory at an efficient rate is an essential part of business accounting and management. Hiring an outsourced accounting professional for your team ensures that you’ll always have a good read on how your sales and inventory are performing, in both the short and long term.
6. Sales Growth
Measuring your company’s sales growth gives business owners a clear picture of your current trajectory in terms of profitability. It measures the percent change in sales on both a monthly and annual basis, so you can begin forecasting revenue and growth while setting profit projections for the upcoming period and reviewing your growth over the course of the last period.
Additional Benefits to Outsourced Accounting
Hiring an outsourced CPA or certified public accountant is a great way to begin planning for the future of your business. It’s essential to keep tabs on the financial performance and profitability of the company you’re managing, but what’s often lacking when you’re operating without a professional accountant is the analysis of your company’s KPIs. The scalability and general flexibility you’ll find at an outsourced accounting firm ensure you’ll have the professional goal-setting assistance necessary for making key decisions regarding the future of the business.
An outsourced accountant often starts working with your business on a small scale and will help you clean up your books, manage payroll, and keep track of existing debts. As you progress towards April, you’ll receive professional tax planning advice that will ensure your business’s financial safety and compliance with all local and national operational regulations. Outsourced accounting is ultimately a cost-effective solution for your business’s back end that ensures your business will continue to operate with financial efficiency and a maximized level of profitability.
- Revolutionizing the Workplace: The Impact of Cutting-Edge Business Software
- Revolutionizing the Future: Exploring the Latest Advancements in Hardware Technology
- Why Taking A First Aid Course Is A Great Way To Upskill
- Why Taxpayers Should Choose to File ITRs Online in 2023
- What Are The 8 Main Cyber Security Threats?