Accounting Practices KPI’s
An accounting practice’s key performance indicators (KPIs) are the set of quantifiable measures that are used to gauge or compare performance in terms of meeting the practice’s strategic goals. A good KPI should act as a compass as it lets you know whether you are taking the right path towards your strategic goals. To be effective, a KPI must be well-defined and quantifiable, communicated throughout the business, and actually be crucial to achieving the goal. They are a ’key’ to optimal performance.
Common accounting practice KPI’s include:
- Profit – This is the most important performance indicator. Both the absolute profit per partner and net profit margin should be analysed.
- Labour cost versus revenue – This should ideally be 30% to 35% of revenue.
- Overheads – Measures cost effectiveness and assists in finding the best ways to reduce and manage costs.
- Number of customer numbers gained versus customers lost.
- Revenue ‘vs’ Target – This is a comparison between the actual revenue and the projected revenue.
- Day’s revenue outstanding – The lower the number, the better the practice is doing at collecting the debtors.
- Work in progress versus revenue – This shows the funds the practice has invested in partly completed work that hasn’t been billed to clients yet. Less than 5% to 10% is good.
- Staff turnover – Annual percentage.