Fortunately, the advent of real time accounting solutions has made it easier to track your Key Performance Indicators (KPIs) and monitor progress on an ongoing basis. This type of insight will be critical in 2020 as businesses look for opportunities to streamline processes and improve efficiency ahead of the changes that may lie ahead next year.
Monitoring profitability, tightening up credit control, managing stock, benchmarking — all of these activities can help businesses be more confident when making decisions and planning for the future.
Take the difference between profitability and cashflow, for example. In growing businesses, it is sometimes the case that sales are increasing, which should mean profits are up, but the business is running out of cash, perhaps because customers are paying too late (too much cash tied up in accounts receivable), defaulting, or the business has too much stock on hand. Learning to understand, and manage, the balance between profit and cash can be one of the most effective ways to enhance business performance.
Similarly, in credit control, monitoring real-time data can spot potential problems like an increase in debts not being paid on time, which could indicate that you have a problem in how sales are processed and/or how new customers are taken on. For businesses exploring new markets, it is important to be aware that local payment practices vary from one country to another and to plan accordingly.
Benchmarking is another practical example where tracking indicators like cashflow, gross margins on sales, use of capital and cost of finance and comparing your performance to that of similar businesses in your industry, can indicate what you are doing well along with where you may need to do better.
With much change on the horizon over the coming months, it will be more important than ever to keep a close eye on your KPIs. At a minimum, you should be controlling costs and maximising both profitability and cashflow and try to be one step ahead of your competitors. If you are unsure which indicators to monitor, or need assistance interpreting your data, now is the time to contact our team so that we can help you ensure your business is as fit as possible for the challenges that lie ahead.