The Necessity of Implementing Accounting KPI
It is inevitable for all businesses to have a systemized way of keeping track of your financial records, or bookkeeping, so to speak. Bookkeeping is something that businesses should never be without because this is an organized method of keeping track of finances, to determine whether the business is indeed earning. For decades now, companies have used accounting sheets for efficient bookkeeping. However, the advent of technology has paved the way for accounting to become techie, so to speak, as well. Still, no matter how techie a company’s accounting system may be, it would still be important to keep track of this very system’s progress, to check if it is indeed aligned with corporate goals and objectives. One way to do this is to employ accounting KPI or accounting key performance indicators. This way, there would be smaller room for marginal errors here.
If you are not too sure about which KPIs to include here, well, do not fret altogether. Technology may have changed certain aspects about the method, especially when it comes to calculation of figures. However, the underlying concept remains the same. Thus, you might find the KPIs used here to be quite familiar. And one of these is revenue.
In fact, the revenue of the company itself is one of the first things that you should include as KPI. In its most basic form, revenue can be defined as the company’s net income once overhead expenses and costs are subtracted. Although overhead expenses and costs can differ from one company to another, these would typically include the capital used by companies for raw materials, the salaries of the workforce, the number of non-productive hours, and the many non-tangible items that any business has to pay for. By including this in your list of KPI for accounting, all managers have to do is look at these figures, and revenue is easily determined. Managers can also check for areas that need improvement.
Another KPI that you can include is yield. It is actually a common mistake amongst managers to look at merely sales figures. They do not really take the time to look at the measures that could have been undertaken to control waste and defects. For instance, let us say that it takes a web content editor two hours to edit ten articles. This is already the fastest that the editor can go at, to ensure quality assurance for the articles produced. However, because a computer virus was able to penetrate the computer network, the editor’s PC is also affected. The network has to be shut down, to eradicate the virus before it spreads to other PCs. Consequently, it took the editor five hours edit just ten articles. This could have been avoided with the simple installation of antivirus software. Making significant changes, therefore, will ensure more yield for the company.
Budget, as always, should be one of the accounting KPI as well. With this on your scorecard, you can easily determine if the company is spending within the budgetary constraints, or if it is already overspending. Thresholds have to be determined here as well. In the scenario mentioned above, it is ideal to get the best brand of antivirus software in the market today. However, it would be more practical to just go with a not too famous brand that still offers the same features that the best brand offers. This is just one of the ways that a company can avoid overspending.
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Tags: accounting dashboard, accounting kpi, accounting metric, accounting roi, accounting scorecard
