How to Work with Your Accountant to Determine New Financial KPIs
One of the most crucial things you can do to ensure that your New Zealand company stays competitive and financially healthy is to regularly update the financial key performance indicators (KPIs) you use. Your review of these metrics will allow you to align your financial management strategies towards the realisation of your business goals. A good grasp of your KPIs will also allow you to better track your day-to-day business performance and sharpen your financial decision-making.
It can be a challenge to identify KPIs that truly reflect your business goals, but your accountant can make this task much easier. Any accountant Dunedin businesses work with should possess the financial knowledge and strategic insight necessary to help you select, refine, and implement KPIs that align with your business objectives.
Work closely with your accountant not only to ensure the accuracy of your financial data, but to also gain a deeper understanding of your financial health and growth potential. Here’s how you can collaborate in determining the new financial KPIs for your organisation:
1) Assess Your Current Financial Performance
Before moving forward, you need to understand where you are coming from first. It makes sense to begin the review process by checking your existing financial KPIs with your accountant. This step helps you identify which KPIs are still relevant and which ones need to be updated or replaced.
Accountants can provide detailed financial analyses to highlight performance gaps, inefficiencies, and trends that may not be immediately obvious to other decision-makers in your business. They can also help interpret these findings to determine how well your current KPIs are supporting your company’s goals.
Assessing your current performance also allows you to understand the effectiveness of your past strategies. For example, if your current KPI focuses heavily on revenue but neglects profit margins, you might miss signs of declining profitability despite rising sales. Your accountant can help you pinpoint such discrepancies and suggest adjustments, such as incorporating net profit margin or cost efficiency ratios, to provide a more holistic view of your financial health. This way, you’ll be able to see whether you’re simply doing enough to meet your targets or achieve sustainable growth.
2) Define Clear Business Objectives
Your financial KPIs should be directly linked to your business objectives. Work with your accountant to clearly define these objectives, whether they involve increasing your revenue, improving your cash flow, reducing company costs, or enhancing your profitability. Your accountant can then assist in translating these broad business goals into specific, measurable financial metrics and make sure that your KPIs match your strategic vision.
Defining clear objectives will allow you to stay focused on what truly matters. For instance, if your goal is to expand into new markets, your accountant might recommend KPIs related to market penetration rates, customer acquisition costs, or sales growth in new regions. Align your KPIs with these objectives to create a roadmap that tracks your progress as well as highlights areas needing attention. The clarity will enable better resource allocation and strategic planning, ultimately driving up your business success.
3) Identify Relevant Financial Metrics
Once your objectives are clear, collaborate with your accountant to identify the financial metrics that will best track progress toward these goals. This might include gross profit margin, operating cash flow, current ratio, or return on investment (ROI). Accountants can then recommend which metrics are most relevant based on your industry, business model, and financial structure, meaning they can ensure that you can focus on indicators that truly matter.
Remember that not all KPIs are equally valuable for every business. For example, a manufacturing company might prioritise inventory turnover ratios to manage their stock more efficiently, while a service-based firm could focus on revenue per employee. Your accountant’s industry knowledge will bring you closer to choosing metrics that reflect your operational realities and growth drivers. Additionally, new KPIs like customer lifetime value or churn rate can offer fresh insights that will allow you to adapt to evolving business landscapes.
4) Take Advantage of New Data Analytics Tools and Technologies
Accountants are adept at using financial software and data analytics tools to gather, process, and analyse financial data. Ask your accountant to help you leverage these technologies for more accurate KPI tracking and reporting. They can help you set up dashboards, for example, or automate data collection and generate real-time reports on your financial status.
Incorporating tools and technologies like these into your workflow not only streamlines financial reporting, but also enhances decision-making. For instance, real-time dashboards will allow you to monitor your cash flow trends instantly, enabling swift responses to potential issues.
Your accountant can also integrate advanced analytics tools that predict future financial performance based on historical data. This predictive capability will allow you to better anticipate challenges, seize opportunities, and maintain a competitive edge in your industry.
5) Establish Benchmarks and Targets
Setting realistic benchmarks and targets is essential for meaningful KPI tracking. Your accountant can help establish these benchmarks by analysing historical data, competitor performance, and any standards relevant to your industry. This process ensures that your financial goals are both ambitious and achievable and that your business has a clear blueprint for success that it can follow.
Benchmarks serve as reference points that allow you to measure performance against internal goals and external standards. For example, if your industry’s average gross margin is 40 percent, but your business operates at 35 percent, this gap signals a need for improvement. Accountants can help dissect these differences, identify underlying issues, and set incremental targets to bridge the gap.
6) Regularly Review and Adjust KPIs
Financial KPIs should not be static, but responsive to changing market conditions and financial landscapes. Regular reviews with your accountant will help you assess KPI performance and make necessary adjustments so that they continue to be aligned with your organisation’s goals.
For instance, a KPI that was critical during a growth phase, such as customer acquisition cost, might become less relevant as your focus shifts to customer retention. Your accountant can help pivot KPIs to reflect new priorities, such as customer lifetime value or recurring revenue growth. The input of a professional ensures that your KPIs always provide meaningful insights and can support better financial decision-making on your end.
Work closely with your accountant, and you’ll be able to develop financial KPIs that not only reflect your current business performance but also guide your organisation towards sustained growth and success. This partnership will transform your financial data into actionable insights, empowering you to make strategic decisions that will secure your enterprise’s spot in front of the competition.
