What's Driving Revenue, Costs and Cash Flow?

At the end of each period, you look at your business results and hopefully admire the revenue, the margin and the net profit. You may even look at the balance sheet, especially if your bankers are interested in key ratios.

But maybe there's a problem with a result, and you need to fix it. What’s driving these figures?

If you were running a multi-stage production process, such as a brewery, you’d have a control room that was monitoring each stage of the process. Each key statistic would be represented on a gauge or other form of display.

A business is like a multi-stage process - typically marketing to sales to operations to cash, depending on the business. What are the key statistics that you need to see? How often do you need them?

These statistics are known as Key Performance Indicators (KPIs), or Key Performance Drivers (KPDs) to distinguish them from results such as revenue.

Designing a set of KPDs has to be done very carefully to ensure they drive behaviour which is actually consistent with corporate objectives. It is easy to implement KPDs which actually promote the wrong behaviour.

KPDs provide early warning of where business processes are off-track, and the insight to tackle any shortfall in results.

If you'd like to take advantage of KPDs, do contact me by email or by phone on 01628 632914.