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How can you prioritize expense performance indicators for your accounting department?

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As an accounting manager, you need to monitor and improve the expense performance of your department. Expense performance indicators (EPIs) are metrics that measure how efficiently and effectively you manage your costs and resources. But how can you prioritize which EPIs to focus on and report to your stakeholders? Here are some tips to help you choose and use the right EPIs for your accounting department.

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Tomi Akinwale ACCA, ACA, ACTI, B.TECH, FMVA, AAT.

Tax | Deloitte | Financial Reporting & Modelling |
Rick Yvanovich FCMA CGMA FCPA MSc CCMP CCMC CBC

Certified Chief Master coach, entrepreneur, author, and speaker | Bridging technology, accounting, and people, I’m a…
David Shonibare (ACA, ACTI)

Chartered Accountant || Financial Analyst 8yrs + Exp || Financial Reporting Expert || Top Business Strategist - Helping…

1 Align with strategic goals

The first step to prioritize your EPIs is to align them with the strategic goals of your organization and your department. For example, if your organization aims to reduce operational costs by 10%, you might want to track EPIs such as expense-to-revenue ratio, expense variance, and cost per transaction. These EPIs will help you assess how well you are meeting your cost reduction targets and identify areas for improvement. On the other hand, if your department's goal is to improve customer satisfaction, you might want to measure EPIs such as turnaround time, error rate, and customer feedback. These EPIs will help you evaluate how well you are delivering quality and timely services to your customers and address any issues or complaints.

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Casey Edmondson

Business Owner @ CLE Bookkeeping Solutions | QuickBooks Certified ProAdvisor | BILL Certified | Xero Partner | Gusto People Advisor
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Here ae a few ways to align expense performance indicators with strategic goals in the accounting department. -Focus on key metrics such as cost-to-income ratio, return on investment, and cash flow. -Prioritize KPIs that directly impact strategic objectives, like reducing overhead costs to enhance profitability or optimizing working capital for improved liquidity. -Regularly assess and adjust KPIs based on evolving organizational priorities to ensure a dynamic alignment between financial performance and strategic goals.

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Wachira Davis
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The first step is to align the performance indicators with the entity's overall strategic goals. This ensures that all line expenditure items, as well as their management and control, are moving in the same direction as the company's goals. Secondly, it is noble to balance the leading & lagging indicators of expenses. Thirdly, one should compare the company's cost-management performance to the budget or the industry as a whole. Fourth, a review should be conducted where necessary, and the results should be communicated to the relevant stakeholders in the company. The next step is to inform stakeholders about the changes, and finally, continuous learning should be embraced.

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2 Balance leading and lagging indicators

The second step to prioritize your EPIs is to balance leading and lagging indicators. Leading indicators are metrics that predict future outcomes, while lagging indicators are metrics that reflect past results. For example, a leading indicator for your accounting department might be the number of invoices processed per day, which indicates your productivity and efficiency. A lagging indicator might be the percentage of overdue invoices, which shows your cash flow and collection performance. You need both types of indicators to monitor and improve your expense performance, as they provide different insights and feedback. Leading indicators help you identify potential problems and opportunities, while lagging indicators help you evaluate the impact and effectiveness of your actions.

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3 Benchmark and compare

The third step to prioritize your EPIs is to benchmark and compare them with industry standards, best practices, and historical data. Benchmarking and comparing your EPIs will help you understand how your accounting department is performing relative to your peers, competitors, and expectations. For example, you can use benchmarking data from professional associations, research reports, or surveys to compare your EPIs with the average or best performers in your industry or sector. You can also use historical data from your own records or reports to compare your EPIs with your previous or projected performance. Benchmarking and comparing your EPIs will help you identify gaps, strengths, weaknesses, and trends in your expense performance and set realistic and achievable goals for improvement.

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Tomi Akinwale ACCA, ACA, ACTI, B.TECH, FMVA, AAT.

Tax | Deloitte | Financial Reporting & Modelling |
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There has to be a consistent and periodic mechanism put in place to always Benchmark and compare results accros industry competitors.

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4 Review and communicate

The fourth step to prioritize your EPIs is to review and communicate them regularly and clearly. Reviewing and communicating your EPIs will help you track your progress, make adjustments, and celebrate achievements. For example, you can use dashboards, charts, or tables to visualize and summarize your EPIs in a simple and concise way. You can also use reports, presentations, or meetings to share and discuss your EPIs with your team, senior management, or other stakeholders. Reviewing and communicating your EPIs will help you ensure accountability, transparency, and alignment in your accounting department and across your organization.

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Rick Yvanovich FCMA CGMA FCPA MSc CCMP CCMC CBC

Certified Chief Master coach, entrepreneur, author, and speaker | Bridging technology, accounting, and people, I’m a catalyst inspiring human transformation for consistently higher achievement.
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Clear communication to stakeholders using simple to use dashboard visualisations and alerts helps keep EPIs in mind. The focus is on usability else it's going to fall into the TL;DR trap.

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5 Customize and update

The fifth step to prioritize your EPIs is to customize and update them according to your specific needs and circumstances. Customizing and updating your EPIs will help you adapt to changing conditions, requirements, and expectations. For example, you can use different EPIs for different purposes, such as budgeting, forecasting, auditing, or reporting. You can also use different EPIs for different levels, such as individual, team, department, or organization. You can also modify or replace your EPIs as your goals, strategies, or processes change over time. Customizing and updating your EPIs will help you maintain relevance, accuracy, and usefulness in your expense performance measurement and management.

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6 Experiment and learn

The sixth step to prioritize your EPIs is to experiment and learn from them. Experimenting and learning from your EPIs will help you discover new ways to improve your expense performance and achieve your goals. For example, you can use your EPIs to test different scenarios, assumptions, or hypotheses about your expense performance. You can also use your EPIs to evaluate the results and outcomes of your experiments and learn from your successes and failures. Experimenting and learning from your EPIs will help you foster a culture of innovation, creativity, and continuous improvement in your accounting department.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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David Shonibare (ACA, ACTI)

Chartered Accountant || Financial Analyst 8yrs + Exp || Financial Reporting Expert || Top Business Strategist - Helping Organizations achieve their goals through the right strategies ??|| Professional Tutor
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Prioritizing expense performance indicators for the accounting department involves evaluating the relevance and impact of various metrics on the organization's financial goals. Start by identifying key performance indicators (KPIs) such as operating expenses ratio, cost of goods sold, overhead costs, and budget variances. Consider the specific needs and goals of your organization to determine which indicators are most critical. Additionally, prioritize indicators that directly align with strategic objectives, financial stability, and efficiency improvements. Regularly monitor and analyze these indicators to assess performance and make informed decisions to optimize expenses in the accounting department.

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How can you prioritize expense performance indicators for your accounting department?

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1 Align with strategic goals

2 Balance leading and lagging indicators

3 Benchmark and compare

4 Review and communicate

5 Customize and update

6 Experiment and learn

7 Here’s what else to consider

Corporate Accounting

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