The difference between financial and non-financial KPIs

The most common key performance indicators (KPIs) that businesses track are financial KPIs. These provide numerical metrics, which measure the progress of monetary business goals, often in the form of profi t margins and revenue. Whilst they are important, the existence of non-fi nancial KPIs alongside financial KPIs can help provide crucial context behind them.

WHY ARE NON-FINANCIAL KPIS IMPORTANT?

Non-financial KPIs provide a holistic view of business performance, which can be used to create new targets. For example, if your business experiences a significant decrease in revenue, you can understand why by tracking non-financial KPIs, such as client satisfaction. This may highlight areas that need tweaking in order to improve the overall experience you provide and in turn increase customer spending.

WHICH NON-FINANCIAL KPIS SHOULD BUSINESS OWNERS BE TRACKING?

The non-financial indicators that a business will choose to measure should take into account their relevant business objectives.

Here are examples of the most common: n Client relationships n Team engagement

Clients determine the success of a business; therefore it is vital that you are able to maintain a strong relationship with them. A key metric to track is customer satisfaction, which can be done via surveys or reviews.

Another measure is customer retention. Low customer retention means you’re relying on new business to increase revenue. If there is an issue with satisfaction however, word of mouth may have created a reputation of poor customer service and in turn leave you with only a handful of customers. It is important to create improvements to ensure that clients are fi nding value in the business.

Without a motivated and happy team, your business is unable to progress. Keeping track of how embedded people are with your business values is necessary as this will drive productivity, innovation and customer satisfaction. One way to do this is by checking how well you’re able to retain employees over a period of time. A high employee turnover may indicate that employees are not invested, which leads to disengagement and potentially with them quitting.

Your team’s satisfaction can be measured with feedback gathered at performance evaluations. If your employee turnover is high, the data collected can be used to see where you are failing to meet expectations. For example, you may find that there are fl exibility issues, or that your business goals are not being communicated effectively.

Tracking salary benchmarking is classed as a financial KPI but checking team satisfaction alongside this will determine whether there is a cause for concern. If what you offer is lower than the market value for salaries, employees may feel that their efforts are unappreciated and are likely to go work for competitors. On the other hand, a team satisfaction check may show that a lower salary is not having a negative impact as you may be providing appealing incentives elsewhere.

n Quality control

To keep profits high and own a competitive share in the market, a business’s product or service will need to be provided with maximum efficiency. Effi ciency can be examined by way of regular checks throughout every stage. This process will ensure that fewer resources are wasted and mistakes are found so that amendments can be made.

If you want more information, or to discuss your business’s KPIs, get in touch.

www.hwca.com/accountants-esher

T: 020 8549 5137

E: esher@hwca.com

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