At the end of each year, businesses conduct their annual year-end review. Business owners are meeting with their teams and assessing their processes, systems, and goals. They are working to ensure the tax year is done right and payroll is completed. In this blog, we discuss business performance measures from a financial point of view.
Common business performance measures
Business performance measures or key performance Indicators (KPIs) are a set of quantifiable measurements used to scale a business’s long-term performance. They focus on providing strategic and operational improvement, creating an analytical basis for decision-making, and helping to focus attention on what matters most when it comes to the improvement of a business. KPIs are often categorised into several different types:
Input KPIs track the resources a business needs for a campaign, project, or process.
Process KPIs track how well a new process is working and help target potential changes.
Output KPIs are result measures that indicate how much work is done and it defines what is produced.
Leading KPIs are quantitative data that help a business measure potential responses to a change.
Actionable KPIs track how well a company commits to and carries out internal business changes. They measure progress within a set period.
Measuring performance through financial statements
Financial performance is a measure of how well a business uses its assets to generate revenue. The term is also used as a general measure of a business’s overall financial health over a given period.
Financial statements are a commonly used measure of financial performance. Namely: The balance sheet, which is looked at to determine the operational efficiency of a business.
The income statement is investigated to determine overall present and future profitability.
The cash flow statement is critical in a financial statement analysis to identify where the money is generated and where it is spent.
Finally, the annual report provides qualitative information that is used to further analyse a company’s overall operational and financing activities. It consists of all the statements listed above but with additional insight into critical figures within the business.
Business goals for the new year
Once you’ve evaluated the previous year, it is time to move forward and focus on setting goals for the new year. Ask yourself where you see room for improvement and create specific goals that will assist in the success of your business. Identify obstacles and provide possible solutions to overcome those hurdles so that you are prepared for anything.
It is easy to get caught up in the excitement of a new year and forget about the importance of planning and preparation. When establishing business objectives, work with your team to determine the strengths and opportunities for improvement. Set goals for the new year using the SMART method. Examples of goals could be wanting to be better when it comes to tax compliance, successful bookkeeping, secretarial tasks, or having the company financials up to date.
For help reaching your business goals contact us at The Acumen Group. We make it our mission to take the hassle out of accounting, allowing business owners to focus on running a successful business.
