Improving Profitability Through KPI For Finance

In every business, managing finances is a great factor that can contribute to success. One of the ways to handle finance well is through making use of KPI for finance. Experts say when you cannot measure the effectives of a certain program or plan, then that cannot be considered useful to the business operation. Hence, it is important that results of financial plans can be measured. In this way, the company can see whether the said plan is in line with the aim of organizing the business finances.

Key Performance Indicators or commonly known as KPI are now the strategy used by many businessmen to manage their companies. KPIs are tools that the company or organization utilizes to quantify achievements. These are effective means to track progress in accomplishing tasks that are towards the goal of the company.

KPIs would differ according to the aspect of the company being assessed. Therefore, the finance KPIs is not the same as that of the KPIs for marketing, recruitment, or advertising. This is the case since every area serves different purposes and has different goals.

In general, KPIs can come in two ways – directional or quantifiable. The so-called directional KPIs give a simple assessment of a certain area of your operation. It only rates whether an implemented program is successful or a failure. Quantifiable KPIs, on the other hand, are the in depth analysis of a program. Companies, in most instances, prefer quantifiable KPIs as this will provide a better assessment of a specific program or area of the business. Literally speaking, data for quantifiable KPIs come in numbers. But these are interpreted and used as basis for further enhancement of the assessed program.

In the past, the concept of KPI is only applied to the finance aspect of the business. This is because management, as mentioned earlier, put utmost concern to the financial side of the operation. Finances dictate whether the company is successful or not through data of revenue or sales. Aside from profit, other financial indicators include cost, market share, and other money matters. But seen as an effective means of measuring performance, KPIs are currently not limited to financial aspect but also used in other aspects of the business, such as marketing, recruitment, administration, and advertising, to mention but a few.

There are some important matters to consider when coming up with KPIs regardless of what aspect it is intended to measure. Goal and analysis are among these considerations. Goals are used as basis to determine what KPIs are appropriate for a certain area. Analysis, on the other hand, should be noted to improve the productivity of the assessed area of the company.

For the part of the company, what is important is how they are going to use the derived results of the KPIs to their advantage. Improvement should be their target. In fact, they must work to address lapses in their financial operation. KPI for finance is only one of the many areas where companies can improve. Oftentimes though, finance is the first thing that business owners want to deal with because of its effect to the company. Remember that a well-organized set of finances is a good step towards profitability.

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