Specialized software, spreadsheets, and databases can all provide advanced reporting capabilities when designed properly. They can generate report after report of detailed data as well as fancy charts and graphs. But, just because you have a nice looking report, does not mean you have the correct information for making decisions. The key is to focus on information that is critical to the success of your business and will help you meet your goals. You need quality information customized to your needs.
Financial data will always be a component for measuring performance. Revenue, gross profit, net income, etc. provide information related to how your business has performed. Key financial ratios provide insight into the overall health of the business. This type of financial information gives you an historical perspective of what has occurred in the business. If profit goes down or a key ratio shifts in a negative way, you have a high level idea that something is wrong.
In addition to financial data, every activity your business engages in has operational data associated with it. For example, sales lead conversion rate, sales return rate, and inventory turnover all represent data that can be generated based on business activities. The most important activities to measure are the ones that clearly align to your business goals. If you are looking to grow your business, then tracking and monitoring the rate at which you are converting sales leads to actual sales is a “key performance indicator”. If the rate is increasing over time, you know your sales processes are working. If the rate stays the same or goes down, then attention needs to be given to the business activities around how leads are generated and the process for selling to them.
Information related to sales leads are just one of many examples. The key to defining how to best measure business performance is to first identify your goals. A business consultant can help you define your goals; identify the key performance indicators that align to those goals; and help you develop a system for tracking your results on an ongoing basis.