KPIs Management Advanced Course

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KPIs Management

“Advanced Course”

Chapter 1 : Overview

Chapter 2 : KPIs by Function Chapter 3 : KPIs by Industry

Notice

 The topics mentioned in this book are considered to be basics and a starting point, as the candidate is supposed to expand his research and reading these topics from the available sources via the internet and others, where the questions were developed in a way that aims to exam the understanding of applicant to the subject.

 Exam's Instructions:

 The exam for this certificate includes 30 multiple choice questions (4 options)

 No time limit for the exam

 The Passing score is 70%

 You have an unlimited number of times to retake the exam

 If you weren’t successful in this exam, it’s not considered the end of the world

 You can re-apply the exam at any time after re-studying and understanding your subject

With our best wishes for all to success

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Chapter 1: Overview

What Is KPI Management?

KPI management is a term used to describe the process of setting, performing, monitoring, and analyzing specific industry key performance indicators (or KPIs) which helps companies and organizations in measuring the level of success in reaching their business objectives.

The fundamentals of measuring performance indicators are not all that different from well-established scientific evaluation methods: ask a question, set a goal, find a quantifiable means of achieving that goal, test these means, then retest for consistency.

Now, apply this methodology to how businesses engage with their clients, and this is what KPI management all about is.

Company A asks itself what its best resources are for attracting customers. Company A then creates ads, launches a blog, boosts its social media presence, and optimizes its website for enhanced search engine rankings. The effort is a success, and more customers start pouring in.

What happens next? How does Company A measure the success of each individual effort so that it can isolate strengths and weaknesses?

The answer is: through a KPI management system based on professional KPI software. Without performance indicators, the bulk of B2B blogs could still largely be based on classic storytelling to rope in more readers, all while falling behind their direct competitors.

So, why is something that seems rather entry-level often so difficult for some executive boardrooms to grasp? Because in practice, getting a handle on performance indicators is far more complicated and costly than an innocuous experiment alone. All businesses have a limit on expenditure; as essential as management of KPIs is to growth, an improper pursuit or inaccurate action can result in a heavy, flowing drain on revenue.

Here, we will discuss KPI's best practices and how to find and leverage the most effective KPIs for your business. But first, we will address a very important KPI-related question based on the studies of a certain Mr. Bernard Marr.

Why Do KPIs Matter?

To answer this most critical of questions, here’s a little help from a renowned author and industry expert:

Bernard Marr is the author of several books, including Key Performance Indicators for Dummies and Key Performance Indicators: The 75+ Measures Every Manager Needs to Know. Marr asserts effective management of KPIs as the answer to this necessity:

“It is more important than ever that business leaders and senior executives are able to make better-informed decisions, improve performance, and seek out new and novel ways to gain the edge over their competition,” Marr explains.

At this point, it’s worth noting that there are countless businesses that have found success without ever even considering performance indicators in practice. Not every venture includes plans for expansion – and that’s okay. But

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for those who want to grow their businesses and track their progress effectively, KPIs are the choice unit of measurement.

Key performance indicators enable businesses to measure their own ability to set and achieve goals. They are often used to measure customer satisfaction, employee performance, and general engagement levels with any audience the company specifically target, and they are handled through a KPI management tool. For example, customer satisfaction metrics are used to drive better customer experience. KPIs, in their essence, transform numbers into behavioral responses by isolating indicating actions with sophistication. These indicators provide the most precious intel a business can buy, fostering a window of insight into targeted efforts that can consistently produce results.

Once again, the effort to gain this intel can be damaging if handled improperly. Ineffective management of KPIs means little actionable data and a terrible return on investment. This, in turn, will cause problems like wasted focus, wayward strategies, and loss of revenue. It is important to think deeply and collectively about best practices to manage KPIs, yet there are universal guidelines that can help steer businesses in the right direction.

What Are KPI Best Practices?

KPI best practices include:

1. Setting the KPIs that are aligned with your business goals

2. Defining what you want to track by narrowing your list to avoid data overload 3. Ensuring that key performance indicators are achievable

4. Using SMARTER practice or the 6 A's

We’ve asked the question: what is KPI management? We’ve also established why performance indicators are so important. Now it’s time to look at finding the perfect KPIs for your business in more detail.

Many industries have used KPI best practices and KPI management solution to isolate their strongest indicators, such as in the field of retail analytics. That’s not to say these indicators are the only choices for retail businesses, but they do make a solid starting point. “The right KPIs or KPIs management solution for you might not be right for another organization. KPIs should match your specific strategy and goals, not just your industry,” says Ted Jackson of ClearPoint Strategy.

To choose between following industry standards or embracing unique indicators is an ultimatum every manager will have to face. For those who want to experiment with less-explored, off-the-beaten-track KPIs, there are two standard practices for evaluation that can help businesses determine whether those particular performance indicators will be effective: the “SMARTER” criteria and the “6 A”.

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Effective KPI Management: SMARTER Practice

 Specific: Start with a specific objective that can be isolated. Pick it apart – remember that customer satisfaction, sales, retention, etc. can all be measured with different KPIs.

 Measurable: Find a definitive way to measure the data that needs recording. Once again, simplification is key here. There should only be one effective method of measurement – an essential aspect of KPIs management.

 Attainable: Make sure the objective is something that can be readily attained. One way of testing this is by making sure the business has completed this objective before.

 Relevant: Ask if these goals are relevant to the target groups. Would achieving this objective impact the groups you are trying to engage, and in what manner?

 Time-bound: Create timeframes and deadlines to accurately measure the KPI. If primary trials produce the desired results, extend the timeframe on the next round.

 Evaluate: See if the KPIs provides the actionable data needed to achieve set goals. Brainstorm with the team to see if any other angles should be examined.

 Reevaluate: Test and retest for consistency before regular implementation. Effective business strategies are built around KPIs, so ensure the data is providing exact and specific answers.

KPI Best Practices: The Six A's

 Aligned: The KPI aligns with the activities of its specific targets. As long as business continues as normal, collecting the data should be effortless.

 Attainable: The indicator is easily attainable so that it can be measured. If data doesn’t start regularly flowing once the trial has begun, there may be something amiss.

 Acute: The KPI makes others well-informed, or acute, of the goal and its measurement. If the purpose of the KPI is at all unclear, it may be a sign to try a different indicator.

 Accurate: The data pulled from a KPI will be used to accomplish future objectives; it must be reliable and accurate so that it does not lead to any misinterpretation.

 Actionable: KPI results produce data that influences a plan of action. KPIs should fuel new processes – if there is no follow-up, then the metric loses its value.

 Alive: The data can be leveraged throughout the company’s lifespan. It should become a constant throughout an ever-evolving business.

Marketing may be all about ROI, but that doesn’t negate the need to correctly connect the dots. And to do that, businesses need to achieve actionable results through KPI best practices.

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“As business leaders, we need to understand that lack of data is not the issue. Most businesses have more than enough data to use constructively; we just don't know how to use it. The reality is that most businesses are already data rich, but insight poor.” – Bernard Marr

Avoid These KPI Mistakes

Mistakes, particularly when you’re dealing with managing KPIs, are not only costly; they could prove devastating to your revenue and resources. To help you avoid such mistakes, here are key considerations for your reference.

As mentioned, selecting the KPIs can turn into an expensive witch hunt, sending marketing departments spiraling into an abyss of pointless data. Ironically, many cost-minded professionals prefer KPIs that seem more direct, such as financial goals. However, focusing all your efforts on instant gratification could be a huge mistake.

In one study, Levi Newman of BSC Designer explains:

“Many managers set goals that are based on the wrong performance measures, meaning they’re not accurately describing the main objective. It’s like saying your target is a dartboard instead of the bulls-eye.”

When setting up your KPIs, do your best to focus on future standards and not past performance. However, keep in mind that these future standards you want to achieve must be realistic; otherwise, your efforts will only lead to a performance assessed as ‘poor’, with frustrated managers and disgruntled employees that will feel less engaged and as a result, less motivated.

Finally, once you know what to measure and how to measure it, you should agree on an action plan with other key stakeholders across the organization. Define who does what and set milestones along the way, all while keeping communication transparent and open. All too often, no clear action plan is defined after setting up a KPI-driven strategy, which leads to misunderstandings and mixed priorities that impact the teamwork, the atmosphere, and ultimately – the growth of the business.

How to Choose the Right KPI Management Solution?

The right KPI management software solution will have this key features and benefits:

1. Be easy to use and accessible to everyone within the organization.

2. Offer data visualizations that are clear, concise, and allow your data to tell a story.

3. Give you access to all of the data and insights you need for success in one central space - no need for spreadsheets and over complex files.

4. Empower you to work with and customize the KPIs that will benefit your business the most by organizing your data in a neat and clear way.

5. Give you the option of managing KPIs effectively online and mobile devices.

6. Come with an exemplary level of user support.

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8. Provide you with a methodical approach to KPI reports.

9. Reduce time needed to collect and analyze KPI data by automating processes.

10. Enable you to integrate custom data connectors to have all your business information in one centralizing place.

To squeeze the maximum value from your KPI data management activities, it's essential to work with the right online data analysis tools for the job.

To track, monitor and gain valuable insights from your performance indicators, selecting the right KPI management software will help you steer your success and gain an all-important edge on the competition.

When it comes to managing KPIs, the tools you work with should offer all of these mentioned key attributes. Through a KPI data management software, you can benchmark, measure, and track your performance with ease, visualizing insights in a way that will allow you to make swift, accurate, and informed decisions that will help you drive the business forward.

With a robust mix of customizable KPIs to choose from, there is a performance indicator that covers every critical aspect of managing and developing a business, regardless of industry or sector. When it comes to KPI data management and maintaining KPI best practices consistently, our software and solutions work. Moreover, as gaining the ability to build your own KPI reports based on your specific goals and needs, you will be able to mould your success and improve your performance in a sustainable way, allowing you to thrive even in the most challenging of circumstances.

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Discover KPI Management Solutions in Practice

A solid starting point would be looking at the standard KPIs used within your industry. As we explained real-life examples, now we will focus on specific KPIs that can be used as templates. Let’s start with the retail example.

1. Retail: When will my customers spend more money?

In these businesses, certain standard retail KPIs include: Average Transaction Size, Total Volume of Sales, Back Order Rate, Customer Retention, Total Sales by Region Order Status, Perfect Order Rate, and Return Reason, among others.

Each of these metrics integrates cohesively with a retail operation.

To have an effective strategy built around KPIs, you must clearly define your goals. Do you want to create a conversation or to engage individuals? Do you want to sell them a single-use product or an idea that would influence them to keep coming back? Are you measuring the output of your employees by their sales numbers or by something a little more abstract?

These are all questions worth asking, and for every one of them, there is a matching KPI. In the example above, we have depicted the Average Transaction Size, a significant KPI for the retail industry since it can evaluate when your customers are more likely to spend money.

The goal is to increase this KPI over time, but it would make sense to combine this metric with others mentioned, to make your insights

more clear. And if you want to additionally polish your reporting techniques, you can have a look at some of our best practices for different functions in the company – management reports, sales reports, or marketing reports – the choice is yours.

2. Sales Management: How do we stand regarding our targets?

Another example we can illustrate comes from managing the revenue of your business, one of the most important sales KPIs for any business. You need to check where you stand after planning and forecasting your sales targets. The goal is to outperform, but certainly, it is wise to evaluate your strategy if issues in the performance arise.

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3. Finance: How do we handle the company's assets?

This example comes from the financial industry. Financial analytics are the core of every finance department, business, and employee. To generate proper value and increase performance, there are various financial KPIs that can advance the collection, monitoring, and analysis of the vast amount of data. Our example depicts the Return on Assets, which need to be as high as possible since you can show how a company's assets are being managed.

All of these business analytics examples show how correct KPI management can bring positive business outcomes by utilizing the right solutions and software. Now, let's take a look on some real-life examples.

See Real-Life Examples of Data-Driven KPI Success

Here are three shining of examples of real-life organizations using KPI management to increase productivity, efficiency, and become smarter in their goal-setting and strategic efforts.

1. US-based web application provider

As we've established, data is only useful if you're able to manage it effectively and gain the insights you need to encourage growth and development. Facing the challenge of fragmented data and poor data management processes, a growing US-based application provider was unable to track the performance of its core sales team.

To overcome this challenge, the company used our dashboard reporting software to improve its decision-making processes as well as manage its sales and customer service performance more efficiently.

By gaining the ability to integrate a customizable, KPI-driven data visualization tool into its existing CMS and gain access to all of its most important data in one central location, the company reaped the rewards of improved customer insights, increased operational efficiency through boosted internal communication, and with the ability to access KPI performance information and insights via mobile devices – enhanced productivity levels throughout the business. A testament to the power of using a KPI real time dashboard to enhance internal performance.

2. The City of Belfast

To demonstrate the enormous power and potential of successful KPI management, this particular example applies to an entire major city.

Belfast has a population of over 330,000, and since the area's political unrest settled down, the city has undergone significant economic growth as well as commercial development. Inspired by this new chapter of prosperity, the city council wanted to improve the quality of life for its residents by rolling out a number of key initiatives throughout the city.

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To do so, the council created a one-page map of their strategy, which involved encouraging culture and diversity, reducing waste and emissions, and stimulating growth through regeneration and tourism. After prioritizing its initiatives, the city council selected a set of KPIs that aligned with their individual goals and used KPI management solutions such as a data dashboard to uncover new insights and measure its performance.

Through developing a key KPI management solution and using reporting tools to visualize its performance in a host of critical areas, Belfast is now a greener city and was recently named one of the world’s best visitor destinations.

3. Nuclear Office

A nuclear office is responsible for the regulation of nuclear safety and security for the nation in which it’s based, and it's safe to say that it’s an important job.

An organization likes this usually manages 400 employees or more. Recently one of the world’s most pivotal nuclear regulation offices identified a lack of interdepartmental cohesiveness, something that was affecting its overall output and productivity. To overcome this roadblock, the organization adopted KPI management solutions to streamline its internal processes and improve leadership as well as interdepartmental relationships.

After interviewing individuals within the organization and collaboratively mapping out a management strategy, the organization carefully selected its core KPIs to help answer its most important questions and monitor its performance over time.

By leveraging performance indicators to its advantage, the nuclear office has not only helped to significantly boost engagement throughout the organization; it has also improved its overall business intelligence and productivity levels.

A testament to the power of employing KPI best practices in the digital age.

A KPI or Key Performance Indicator is a measurement that evaluates the performance of a business activity. It measures the success of a company at reaching its operational and strategic goals on different performance aspects.

KPIs can be high-level, monitoring the global performance of a business, or more low-level, focusing on processes ‘or individual’s performance.

No matter which department you are in, KPIs are vital to grasp the status of your business to make the right calls. How can you tell which KPIs are relevant? Which are going to help you and which will cause distraction?

KPIs help managers gauge the effectiveness of their functions, processes, campaigns and actions. They are essential to ensure you are on track to reach organizational goals. Make informed decisions with datapine. We help you cut through the noise and see the actionable data you need. Control the act of accessing, visualizing and reporting data with our first-class interface. Monitor your most significant KPIs in one place, obtain a comprehensive overview of your business and make more informed decisions.

It isn’t always easy to find the right performance indicators that will fit your department or activity. The objective is always to determine those that communicate progress in the most meaningful way. We have identified the KPI examples that are most relevant for each department, specific industry or platform. Take advantage of our metric library and KPI templates to identify and visualize the metrics that are most important to your area of business. Below you will find the links to over 300 visual KPI examples and templates with recommendations for action and relevant showcase dashboards.

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Chapter 2: KPIs by Function

Management

Management dashboards are extremely useful when strategic decision-making processes need to summarize often complex data and turn them into actionable insights and reports. This can be easily done by using a reporting software that will enable CEOs detailed visibility of business performance across main metrics with factual and real-time data.

1. CUSTOMER ACQUISITION COST

How much does it cost you to sign up a customer?

The CAC or Customer Acquisition Cost is a crucial management KPI for your business, both for your company and for investors. It represents all the costs incurred to convince a prospect to buy a product or service, and thus turn him into a customer. These costs vary greatly according to your business industry and function – an online marketer will include all the campaigns costs, while a SaaS company will add up the staff wages, the sales and marketing costs. For subscription-based business models it is often recommended to cover back the CAC within one year of a customer acquisition, or it will burn all your capital before you can even depend on monthly recurring revenues.

Performance Indicators

Like in our visual management KPI example on the right you should track the development of your CAC over time. Set a concrete target and try to decrease your CAC steadily over time.

2. CUSTOMER LIFETIME VALUE (CLV)

How much money will you get from a customer over the course of your relationship?

The CLV is a prediction of all the value that will derive from doing business with a customer. The problem is we never know how long a relationship will be, so it is better to make a good estimate and state the CLV as a periodic value: this customer’s 6, 12 or 24 months CLV is of that amount.

To calculate this sales related management metric, you need to distract the CAC of the total amount of revenue you expect from that customer over that period of time. The CLV also lets you know how much money you can allow for your CAC to still be profitable. This is a metric important to track: the longer you manage to keep customers paying, the more revenue you will make.

Increasing your CLV over time is critical for a successful business model. That’s why it is one of the most important management metrics to track.

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3. SALES TARGET (ACTUAL REVENUE VS FORECASTED REVENUE) Check if you are on track with your sales targets

One of the main priorities, after planning and forecasting, is to actually check where you are regarding these goals: did you exceed the sales targets, or on the contrary are you lagging behind? What are the reasons? Did you take all the different factors into account when forecasting these sales targets? Understanding all of this will help you know where you stand, what you can improve and identify outliers from trends. It also helps the management to forecast more accurately in the future. Thanks to that information, you are well prepared and you see if your team is doing what they should, if they need help or if you should squarely rethink the whole strategy.

Your goal is to naturally exceed your sales target, meaning you did even better than expected.

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Finance

The financial sector needs to regularly track, monitor, and analyze a company’s performance in order to keep a healthy status and avoid monetary bottlenecks. That’s why financial metrics have a special significance in every company, and the team that deals with them, needs proper dashboard reporting to effectively manage and optimize those processes. With the help of our list, you can create a complete financial dashboard that will enable you to interact with each metric and automate most of your reporting and analysis processes. By implementing these KPIs through the power of financial business intelligence, you have the opportunity to make your financial data and insights better, more informative, and easier to manage.

Here is the complete list of the top 18 finance KPIs and metrics that every financial professional needs to know:

1. GROSS PROFIT MARGIN

How much revenue you have left after COGS?

This financial KPI refers to your total revenue minus the cost of goods sold (COGS) or service delivered, divided by your total sales revenue. This KPI signifies the percent of total sales revenue that you keep after accounting for all direct costs associated with producing your goods and is an important measure of the production efficiency of your company. Direct costs include the price of materials and labor but exclude expenses such as distribution and rent. Let’s look at an example: If your gross profit margin last year was 40%, you would keep 40 cents out of every dollar earned and put it towards running your company by taking care of administration cost, marketing cost, and rent, among others.

The higher gross profit margin you manage to acquire, the more income you retain from each dollar of your sales.

2. OPERATING PROFIT MARGIN How is your EBIT developing over time?

This financial KPI template shows the operating profit margin, also known as

“earnings before interest and tax” (EBIT), as a percentage of total revenue earned. It does not include any revenue earned from the firm's investments or the effects of taxes. It is calculated by dividing operating profit by your sales revenue. The operating profit margin measures how profitable your business model is and indicates what is left over from your revenue after paying for all operational cost.

This can easily be done by using financial analytics software that can automate your calculations.

The higher the operating income, the more profitable you company is likely to be. If this number is declining then you need to quickly identify the reasons and take action.

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3. OPERATING EXPENSE RATIO

How do you optimize your operating expenses?

One of our next finance KPI examples, the operating expense ratio (OER), shows the operational efficiency of your company by comparing operating expenses (the cost associated with running your core operations) to your total revenue. The lower your company's operating expenses are, the more profitable your company will be. With modern KPI dashboards, you can easily analyze and track your operating costs in detail. These breakdowns are also useful when benchmarking your company against other organizations.

As these numbers vary wildly by industry, when benchmarking please make sure to survey companies in a similar field. Investors are often interested in the operating ratio to specifically examine how high your operating costs are in relation to generated revenue.

Over time, changes in your company’s OER should inform you whether or not your company is scalable. Can you increase sales without increasing operating expenses?

4. NET PROFIT MARGIN

How well your company increases its net profit?

Net profit margin measures your profit after subtracting all operating expenses, depreciation, interest and taxes divided by the total revenue (net income x 100 / total revenue). The net profit margin is one of the most closely tracked KPIs in finance. It measures how well your company does at turning revenue into profits. As a percentage of sales, not an absolute number, it is often used to compare different companies and see which of them are most effective at converting sales into a profit.

The higher your net profit margin, the better off you are. Review any decline with a fine-toothed comb to fix any problems from decreased sales to unsatisfied customers ASAP.

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5. WORKING CAPITAL

Is your company in stable financial health?

The top financial KPIs wouldn’t be complete without the working capital.

This KPI is not a ratio or proportion, but solely the number of dollars remaining after you subtract your current liabilities from current assets.

Your assets include your cash, inventory, accounts receivable or prepaid expenses etc. and empower you to pay for ongoing operating expenses and fund standard business operations. On the other hand, current liabilities represent all the obligations or debts that are due within 12 months. That can include accounts payable, bank operating credit, accrued expenses, taxes payable, etc. This is one of our KPI examples that illustrates a company’s operational efficiency and short-term financial health, which is important in the process of financial reporting and analysis.

High working capital doesn’t automatically mean the company is performing extremely well. It can also mean that is not investing the excess cash.

6. CURRENT RATIO

Can you pay your short-term obligations?

We have included the current ratio as one of the top financial KPI templates that concentrate on liquidity. It measures your ability to pay your obligations in the short-term, often within 12 months. Unlike some other liquidity ratios, this one includes all current assets and liabilities. It is calculated by dividing your current assets (such as cash, accounts receivable, inventory, and prepaid expenses) by your current liabilities (accounts payable, credit card debt, bank operating credit, taxes, etc.). The goal is to have a ratio higher than 1. If your ratio is lower, you would be unable to pay off your obligations if they were suddenly due. This ratio is a key indicator of a company’s short-term financial health and shows whether you are able to collect accounts due in a reasonable amount of time.

The higher your current ratio, the more capable you are of paying your bills in the short-term. Banks often recommend a current ratio higher than 2.

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7. QUICK RATIO / ACID TEST Is your company’s liquidity healthy?

We continue our finance KPI examples with the quick ratio. This metric takes into account just the short-term liquidity positions (the so-called near-cash assets) that you can convert into cash quickly. It is much more conservative about the assets since it doesn’t include all of them. It is also known as the acid test ratio, as it produces instant results. This KPI also expounds on the liquidity of a company but it should consider assets that can be easily converted into cash, usually within 90 days or so, such as accounts receivable.

The higher the ratio, the better your liquidity and financial health. In comparison to the current ratio your quick ratio will be always

smaller, because it just includes near-cash assets. Your goal should be to have at minimum a quick ratio of 1,0.

8. BERRY RATIO

Are you losing money or generating profit?

Our list of the most important financial key performance indicators wouldn’t be complete without the berry ratio.

This metric compares the gross profit of a company with its operating expenses, and you can use it to indicate the profit in a specific time period. If the coefficient is above 1, it means that your company is making profit above all variable expenses, while a coefficient below 1 will indicate that your company is losing money, therefore, it would make sense to look into this metric over a timeframe in order to monitor if the performance starts to drop. In our example, we can see that the ratio is above 2 which means that the company is generating a healthy amount of profit.

Track this metric over a set timeframe and ensure your

coefficient stays above 1 in order to keep generating profit against variable expenses.

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9. CASH CONVERSION CYCLE

How fast can you convert resources into cash?

The cash conversion cycle (or CCC) is a quantitative measure that helps to evaluate how efficient a company’s operations and management processes are. It basically measures how long does it take for a company to convert its inventory investments and other resources into cash flows from sales. The mathematical formula for calculating CCC = DIO (days of inventory outstanding) + DSO (days sales outstanding) – DPO (days payable outstanding). A steady or decreasing CCC is a fairly good sign, but if it starts to rise, an additional analysis should be made. It also differs across industries based on the nature of business operations.

If a company is efficiently managing the requirements of the market and its customers, the cash conversion cycle will have a lower value.

10. ACCOUNTS PAYABLE TURNOVER

Are you paying expenses at a reasonable speed?

Accounts payable turnover is a short-term liquidity financial metric and shows how quickly you pay off suppliers and other bills. It is derived from your total purchases from vendors, divided by your average accounts payable, over a set period (total supplier purchases / avg. accounts payable). In other words, the accounts payable turnover ratio indicates how many times a company can pay off its average accounts payable balance during the course of a defined period, such as one year. For example, if your company purchases $10 million worth of goods in a year, and holds average accounts payable of $2 million, the ratio would be five. If your accounts payable turnover ratio is increasing, it means that you are paying your suppliers at a faster rate. The opposite would be the case when the turnover ratio is decreasing.

A higher ratio shows suppliers and creditors that your company pays its bills frequently and facilitates when negotiating a credit line with a supplier. On the other hand, paying your bills fast reduces your available cash.

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11. ACCOUNTS RECEIVABLE TURNOVER How quickly do you collect payments?

Our next KPI for finance is the accounts receivable turnover which measures how quickly you collect your payments owed and displays a company’s effectiveness in extending credits. This KPI measures the number of times that a company can collect its average accounts receivable and is calculated by dividing the amount of all supplier purchases by the average amount of accounts receivable for a given period. The faster your company can turn credit sales into cash, the higher your liquidity. A low accounts receivable turnover ratio signifies that there is a need to revise the company’s credit policies to ensure a more timely collection of payments.

The higher the accounts receivable turnover ratio, the better and the more liquidity you have available to finance your short-term liabilities.

12. VENDOR PAYMENT ERROR RATE

Are you processing your invoices productively?

This is one of our financial KPI templates that focuses on the company’s diligence in issuing and paying vendors (creditors, suppliers) invoices. These errors may include payments made to the wrong entity, underpayments or overpayments, and fundamentally, it shows if the company has a stable accounts payable department. It is calculated with the total number of payments that contained an error divided by the total number of transactions over a period of time and expressed as a percentage. The goal is to keep this percentage as low as possible and deliver accurate and timely invoices (and payments). This will create stronger partnerships between companies.

A high percentage of the error rate clearly indicates that the

controlling of procurement functions lacks efficiency. This can lead to vendor disputes.

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13. BUDGET VARIANCE

Is your budgeting accurate and realistic?

The budget variance is one of our next financial KPI examples which expresses the difference between budgeted and actual figures for a specific accounting category. It can be favorable or unfavorable, each caused by various internal and external factors such as labor costs, poorly planned budget, natural disasters, changing business conditions, etc. The goal is to keep the revenue that comes in higher than budgeted, or expenses lower than originally predicted. That would ensure a greater income than expected. On the other hand, if revenues fall short of the budgeted amounts, expenses get higher, and the variance becomes unfavorable.

Keep your budgeting and assumptions realistic and accurate as

possible to avoid unfavorable budget variance and, consequently, increase your expenses.

14. RETURN ON ASSETS (ROA)

Do you utilize your company’s assets efficiently?

Return on assets is an indicator of how profitable companies are in relation to their total assets. This financial KPI is calculated by dividing your net income by the total assets. The assets of a company include both, debt and equity. The increasing ROA is a good indication since it states that either the company is earning more money with the same account of assets or it generates equal profits with fewer assets required. This KPI is important to potential investors because it gives them a solid insight into how efficiently management is using their assets to generate earnings or in other words, how effectively they are converting investments into net income.

The higher the return on assets (ROA) the better, especially compared to other companies in the same industry.

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15. RETURN ON EQUITY (ROE)

How much profit do you generate for shareholders?

Return on equity (ROE) measures how much profit your company generates for your shareholders. In other words, management often utilizes it to measure how effectively a company is using its assets to create profits. This metric can be calculated by dividing your company’s net income (minus dividends to preferred stocks) by your shareholder’s equity (excluding preferred shares). It is often used to compare the profitability among certain companies within the same industry. For example, if a tech company has a ROE of 20% compared to its peers that have an average of 17%, an investor can conclude that the management has above average results in using the assets to create profits.

The higher the return on equity, the more value you are generating for your shareholders. Keep in mind to compare the results within your industry.

16. ECONOMIC VALUE ADDED (EVA) Do you generate true economic profit?

To calculate the economic value added (EVA), you need to deduct the costs of capital from the operating profit and adjust for taxes on a cash basis. This finance KPI example shows the value a company generates from funds invested into it. If the value is negative, the company is not generating value, and, on the other hand, if it’s positive, the company generates value from the funds invested. The basic formula to calculate EVA is as follows: net operating profit after taxes (NOPAT) - invested capital * weighted average cost of capital (WACC). You can see in our example an automatic calculation and immediately spot that the company generates value and has a positive EVA which is a positive sign of development.

Monitor EVA on a regular basis so that you get aware of the company’s wealth through assets and expenses in order to make better managerial decisions.

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17. EMPLOYEE SATISFACTION

Will your team recommend you as a workplace?

We continue our financial metrics examples with the employee satisfaction levels depicted through the net promoter score (NPS) in our visual on the right. This isn’t a financial KPI per se, but it’s important to keep employees and customers satisfied as the ultimate goal, since low satisfaction levels from both will end up in worse financial metrics. We have also visualized the development over the course of a year so you can also use it as a trend indicator. That way, you can see which months have performed better or if you need some adjustments in your talent management processes. A quick trend overview, whether positive or negative, will enable you to immediately spot if your employees (or customers) are satisfied or not. Consequently, you can adjust your strategies, examine your data and people management, if you see that the satisfaction levels drop.

Use this metric to get a better overview of your people management processes, but dig deeper with other HR metrics in order to gain a complete overview.

18. PAYROLL HEADCOUNT RATIO How do you utilize your labor force?

The payroll headcount ratio is a metric you can calculate by dividing HR full-time positions with the total number of employees. You can include freelancers, part-time employees, and contractors, for example, to be able to evaluate, in the best possible manner, how well your company is utilizing its workforce. This metric basically shows how many people are engaged in the payroll process in comparison to the total number of employees. If the ratio is rising, it means that you’re adding labor costs so it might make sense to keep an eye on this metric so that you don’t experience potential financial difficulties.

Make sure your labor costs are well invested and bring positive

financial gain. If you spend more than you earn, you need to reconsider your employment strategies.

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SALES

In this overview, we will show you the most critical KPI examples for sales that will enable you to manage your sales more effectively and optimize as well as analyze every single sales process in detail. In order to make a complete picture of your sales development and data, we suggest you create a professional sales dashboard that will centralize your KPIs in an interactive form and enable you to dig even deeper. That way, you will be able to control your sales activities, identify potential bottlenecks, and optimize your sales BI processes more effectively. Besides, online reporting software will ensure your reports are automated, easily sharable, and deliver up-to-date KPI data.

Here is the complete list of the top 17 sales KPIs and metrics that every sales rep and manager should know:

1. SALES GROWTH

Is your business growing steadily?

It's a fact that by tracking the growth of your sales, you also track the growth of your company. It goes without saying that it's important to be mindful of this sales KPI. Follow the performance of your sales reps, their target industry, and area through professional KPI dashboards. Let's say your team focuses on many verticals and only one of them proves to bring significant returns. This could be a sign to reassess the verticals distribution in your team. You won't leave money on the table and you'll have higher returns. Be flexible and analyze your sales KPIs, and you'll bring more sales revenue to your business and, consequently, profits.

A positive sales growth over a specific period of time indicates that you are on track with your sales goals to grow your business.

2. SALES TARGET

Are you on track regarding the sales targets?

One of your top priorities should be to understand if you are on track to reach your planned goals. By implementing automated sales reports, you can answer questions such as: Is your actual revenue better or worse than your forecasted revenue? When you first planned your goals, what did you base it on? Is your baseline included in your charts? This information will help you expect deal activities, results and, in case inconsistencies arise, you’ll better recognize outliers versus trends. This metric lets you know whether your team is doing what they should, if they need help or if the whole strategy should be changed or adjusted. It's crucial for forecasting, and it lets you know if other factors can impact your bottom line.

In a good assessment of your actual revenue versus your forecasted revenue, the goal should be to outperform your

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3. CUSTOMER ACQUISITION COST How much does a new customer cost?

When we mention customer acquisition cost (CAC), we are referring to all costs incurred in signing up a customer. Different costs are associated depending on your line of business, for instance, if you’re an online marketer, you’ll include the costs of all your campaigns.

In a traditional SaaS business, it might mean everything from all your staff’s salaries, all marketing and sales costs. It is recommended to recover your CAC in less than one year of your customer’s subscription. If this isn’t the case, you’ll burn through all your capital before you can depend on your monthly recurring revenue.

The goal is to increase customer lifetime value and average revenue per unit or user/account, while cutting CAC, to maintain a profitable business.

4. AVERAGE REVENUE PER UNIT (ARPU) What is your average revenue per user?

ARPU stands for average revenue per unit, the unit part of the acronym can also stand for user, account or any other paying customer. This sales KPI indicates the average customer’s revenue from all your sales.

It's a simple calculation, you take your total monthly (recurring) revenue and divide it by the total amount of customers you have in your roster. This might seem obvious to some and it’s worth pointing out that if your ARPU is higher in comparison to your acquisition costs, you might run into trouble. Your customer acquisition costs should always be lower, otherwise, you’re not making any profits from your revenues.

If your ARPU is rising you should be on track. This usually means that you are signing bigger customers, or signing customers with bigger plans.

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5. CUSTOMER LIFETIME VALUE (CLV)

How much do you expect to earn per customer?

Our next sales KPI example refers to your customer lifetime value (CLV) which is important to track because the longer you keep having paying customers, the more you’ll make. To calculate this sales metric, you need to distract your CAC from the total amount of revenue which you expect to get from a new customer over the lifetime of the relationship. If your ARPU and CLV are rising, it signals that on average you are getting more revenue from each customer, for longer and that’s exactly what you should be aiming for. CLV enables you to understand how much you can allow for your CAC to still be profitable; a healthy ratio is key.

As long as customer lifetime value and average revenue per unit are growing, you’re in the green and your CAC are appropriate

6. CUSTOMER CHURN RATE How many customers do you lose?

One of our sales KPI examples is especially important for businesses with monthly recurring revenue such as SaaS businesses. The customer churn rate expresses the number of customers who stopped using your company’s products or services in a defined timeframe and gives you a realistic overview of your customer retention strategies and what kind of trends you cope with. To calculate the exact churn rate, divide the total number of customers you had at the beginning of the month with the total number of customers lost. You can also automate these calculations by using professional software that can trigger alarms if any sales anomalies occur. Your goal should be to keep the churn rate as low as possible.

The higher the churn rate, the more customers and revenue you will lose. It should be on top of your priorities when it comes to developing retention strategies.

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7. AVERAGE SALES CYCLE LENGTH How do you shorten your sales cycle?

If it's realistic to shorten your sales cycle in your industry, you first need to understand how you can optimize your current sales cycle. We recommend you analyze the cycles for individual reps at the different stages of the cycle. A quick comparison can show how effective a rep is in comparison to others in your company. The shorter the time each lead spends in each stage of the funnel, the better. This can also serve as a way to track an individual rep’s progress over time. We show this on a sales KPI template that can alert you on when your staff could need extra training and goal setting.

Once you have a sales cycle length baseline, the goal should be to decrease that number, resulting in more sales in a shorter period of time.

8. LEAD-TO-OPPORTUNITY RATIO How about your lead quality?

For the most part, every new lead is an unqualified lead at the beginning. Conversely, a qualified lead refers to a lead that meets qualification requirements. Although this varies from sales organizations, a qualified lead is most often an opportunity. A common tactic sales managers use to determine if leads are qualified is the BANT method. It stands for leads with a Budget, Authority, Need and Timeline requirements. The goal of this process is to measure if your lead can become a customer. The lead-to-opportunity ratio lets you understand the amount of leads you need to stay on track with your revenue goals. Once you’ve established a baseline ratio, you’ll know how many leads you need to create your target growth, and you’ll have revenue that is predictable.

Your lead-to-opportunity ratio is the first part of the sales funnel to be examined. By looking at what is working and what isn’t you have a better idea of where quality leads are sourced from, and can guide the marketing and sales team better.

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9. OPPORTUNITY-TO-WIN RATIO

How many qualified leads result in closing a deal?

This sales KPI tells us how effective a sales team or sales manager closes accounts. Whereas tracking leads to opportunities gives you an idea of how interests turn into a discussion, this metric measures how discussions turn into money in your business. Sales reps will refer to this as a win, hence opportunity to win. Some reps are amazing at sparking a discussion but might lack the right skills and motivation to close accounts. Sales metrics like these can help you identify and train them to close more deals.

Looking at each rep’s opportunity-to-win ratio can enable you to identify areas of improvement and act accordingly.

The closer the ratio of opportunity-to-win, the more effective your salespeople are at the later stage of the

pipeline. If your team isn't closing a minimum of 15% of your qualified leads, you might need to rethink your qualifications process.

10. LEAD CONVERSION RATIO Is your conversion ratio stable?

One of the most important KPIs for sales is the magic number, the lead conversion ratio – ostensibly the amount of interested people that turn into paying customers. Some businesses have a 1 percent conversion rate and others might even reach 10 percent, and either could be succeeding in their field. Once you have a baseline, you’ll know how many leads you need to convert your current rate of customers. When you understand the ratio of your conversions and your average sales cycle, you'll know how many leads you need to keep your team running full steam. You'll also know how many reps you need at any given point.

If your lead conversion rate is on target, you know that your sales pipeline is in good shape. A low lead conversions rate alerts you to weaknesses in your sales pipeline. Find benchmarks for your specific industry and use them as a target.

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11. NUMBER OF SALES OPPORTUNITIES What is your potential purchase volume?

The number of current and new sales opportunities plays a decisive role in sales management. To properly optimize and increase the value of your sales metrics, the number of opportunities should be high on your list. While the number of unqualified leads is an important KPI in marketing, only valid qualified leads are really critical for sales. For example, leads with incorrect contact information have no real value for sales. In addition to detailed time monitoring of the number of new sales opportunities, e.g. daily, the potential purchase volume of these open opportunities is also an interesting KPI that you can see in our visual example. Furthermore, you will find trend indicators that compare the current performance with the previous month.

Monitor the number of (new) sales opportunities and their potential purchase value. This allows you to identify bottlenecks in your sales funnel at an early stage.

12. SALES OPPORTUNITY SCORE

Do you prioritize your sales opportunities?

First of all, every single sales opportunity needs to meet your minimum lead requirements. However, there are of course still different classifications within opportunities in terms of potential and sales opportunities. This is where scoring models come into play, a KPI for sales that helps you assign a standardized value to your sales opportunities, for example, a value from 1 to 5, as shown in our example. Such a score is used to further prioritize your opportunities in order to make the best use of your sales resources. It ensures that particularly profitable sales opportunities are handled promptly but also with high priority. Modern scoring models can assign the appropriate values based on the most important, underlying influencing factors completely or partially automatically. In practice, this process is still sometimes carried out manually.

Adequate opportunity scoring enables you to achieve your sales targets even in highly competitive markets so this metric should be monitored regularly.

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13. AVERAGE PURCHASE VALUE

Is your average purchase value sustainable?

The average purchase value is one of the sales performance metrics that you can use when developing a sales growth strategy, revenue projections, and forecasting. It shows the average sales value of each transaction and, in our example, you can see 3 different packages or categories: basic, premium, and professional. It’s interesting to compare the average purchase value with the number of opportunities since you can immediately see how they correlate. Besides, this is one of our sales KPI examples that can tell you if you need to offer more incentives to your customers in order to increase your chance to sell higher-end products or services.

Compare your average purchase value with your past performance in order to understand if the metrics increased or not and look into it together with the number of opportunities.

14. REVENUE PER SALES REP

How much revenue your sales reps bring?

KPIs for sales must include stats about sales reps. You need to know how your team is performing and what kind of targets they need to reach, and this sales KPI will help you to do just that. It would be wise to compare these stats with the previous period to get a more detailed overview if your team results are growing or not. Set ambitious, but realistic goals.

You can then analyze the exact revenue a sales rep is bringing, and depict these results over time. The target line will show you the average which you can adjust based on your overall sales goals.

Identify which of your sales rep is bringing the best results and compare them with other representatives to be able to improve your team’s performance.

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15. PROFIT MARGIN PER SALES REP Is your sales team profitable as expected?

Profit margin is one of the KPIs for sales that expounds on the profitability of the sales reps. This KPI is useful when management needs to determine whether to offer promotions or bonuses for each representative, or to determine the amount of the commission, for example.

On the other hand, sales reps can use the margin to identify where to allocate their time and resources to be able to deliver the best possible results. It would make sense to compare the results between representatives and set realistic targets that each can outperform while bringing the best value and buck for the department or company.

Compare your results over time and identify each sales

reps’ strengths. See if the targets are met or your sales strategy needs additional adjustments.

16. UPSELL & CROSS-SELL RATES

How do you increase your revenue and ROI?

By implementing effective upselling and cross-selling tactics in your sales department, you stand a greater chance to increase your return on investment (ROI) and revenue in the long-run. It is far easier and cheaper to sell and, therefore, generate more revenue from existing clients and customers, than to acquire new ones. With upselling tactics, you encourage your customer to buy a more expensive upgrade or package of your product or service while cross-selling concentrates on purchasing an additional related product or service, for example. It also improves your customer service since your relevant suggestions for additional products and/or services can increase customer loyalty and customer satisfaction, too.

Compare your upselling and cross-selling rates by the sales reps and see which one of them is the most successful.

Implement their tactics to the whole sales department.

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17. INCREMENTAL SALES BY CAMPAIGN Which campaign brings you the best results?

Incremental sales by a campaign is another important KPI as it shows the number of sales generated by each marketing activity you have performed, whether through social media or e-mail. You can calculate your incremental sales by subtracting your baseline sales with your new sales generated. That means if you have your current sales of 75000$, and new sales of 95000$, your incremental sales will be a total of 20000$, resulted in your marketing campaigns. If you track this sales KPI on a regular basis, you will be able to determine which campaigns bring you the best possible results and develop further strategies with these new facts.

Identify your best campaigns that have brought to you the

highest number of incremental sales, and monitor the results over time.

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Marketing

A Marketing KPI (key performance indicator) is a measurable value used by organizations to evaluate the impact of marketing activities while helping professionals to monitor the success of different marketing channels to determine efficient budget spending strategies.

Here is the complete list of the top 16 marketing KPIs and metrics that every marketer should know:

1. Cost Per Acquisition (CPA)

Are your customer acquisition costs viable?

Cost per acquisition is an online advertising pricing model, where advertisers pay a stated price for acquiring a new customer. It is also often used in affiliate marketing and has the advantage of being even more performance-based than the CPC pricing model. This is because you only pay for new customers as opposed to website visitors. CPA is often used to compare the customer acquisition costs (CAC) of the different online marketing channels. To calculate CAC, you divide the total costs of all acquisitions by the number of new customers in a certain time period. With this marketing KPI, you can compare how viable each channel is for acquiring new customers and create comprehensive marketing reports.

Compare your cost per acquisitions through different marketing channels and calculate how much you are willing to spend for one new customer.

2. COST PER LEAD (CPL)

How much should you spend per lead?

A lead is a potential customer that has interacted with your company through your marketing activities. The cost per lead (CPL) is one of our marketing KPI examples that is inevitable for efficient performance marketing. It is calculated with the total costs of a specific campaign divided by the number of leads generated. The figure you get helps you to identify where you should focus your marketing efforts since you can compare the CPL for different channels or campaigns. This can be automated by using professional marketing analytics software. It also makes sense to track the CPL over time to see when was the lowest with the biggest revenue or net income – that would mean your strategies at these times were effective.

Make sure you compare the total cost per lead with the net income per lead to be able to identify your most profitable marketing activities.

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3. Sales Target & Growth

Do you outperform your sales targets?

Sales target and growth is a real high-level marketing KPI that is influenced by the whole business strategy. However, your marketing activities have a major influence on your sales and, therefore, you should set ambitious sales targets and monitor them in detail, because at the end of the day the goal of your marketing activities is to sell more and make the business more successful and profitable, not just gaining more social media followers. Thanks to modern marketing dashboards you can unify your marketing and sales data within one central place of access and increase your overall marketing effectiveness. In our visual marketing KPI template on the right, we show the development of the revenue per day and the gauge charts compare the performance to last months as well as to the set target.

Set realistic sales targets and track them on a monthly basis to ensure stable growth and viable revenue. Compare your results with the previous periods.

4. AVERAGE ORDER VALUE

What is the average shopping cart value?

This is one of the marketing analytics KPIs important for e- commerce companies. To calculate the average order value (AOV) or the average shopping cart value, you need to divide the total revenue by the number of orders placed. Correspondingly, e-commerce companies are always interested in increasing the average order value, as this will still lead to sales growth with a constant number of orders. There are numerous measures to increase the shopping cart value, for example, placing relevant up- as well as cross-selling offers, optimizing the shipping cost limit, offering vouchers or discounts depending on the value of goods, to name just a few. The average order value can also vary for different marketing channels, which we have illustrated in our visual example.

Test and analyze different methods to increase the average order value, for example the ones mentioned above or dynamic pricing.

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5. Return on Investment (ROI)

How efficiently are you spending your budget?

The return on investment (ROI) is the holy grail of all of our marketing KPI templates listed. It’s most often to compare the efficiency of an investment or to compare many investments. To calculate the ROI, you divide the profit/benefit of the investment by the total costs of the specific investment and display this ratio in a percentage. For example, if you did an e-mail marketing campaign, which cost you 8000$ and you made 10000$ revenue out of this campaign your ROI would 25%. For online marketers, this KPI is especially useful to compare the ROIs of different marketing channels or campaigns to spend their marketing budget on the channels/campaigns, which have the highest ROI.

The higher the ROI the better. A high ROI displays that you spend your marketing budget effectively. Identify with this marketing metric the worst and best performing online marketing campaigns.

6. Customer Lifetime Value (CLTV)

Are your new customers profitable in the long-run?

The CLTV is one of the most important marketing KPIs, because with this KPI you can control how much money you are willing to spend for a new customer (CPA). You can calculate it by subtracting the cost per acquisition (CPA) from the average revenue per acquisition, which refers to the total amount of money you actually made from one new customer. For example, if you spent on average 80$ for a new customer and they produce on average 130$ of revenue over there whole lifetime, your CLTV or profit per acquisition would be 50$. These marketing metrics are really useful when you compare different marketing campaigns and channels to identify your most profitable online marketing activities and determine where your marketing dollars should go in the future.

The higher your CLTV the better. It ultimately helps you to identify ineffective marketing activities where you spent more money on a customer than he is worth it.