Key business KPIs to track

For executives at leadership level it is essential to have certain metrics which can measure the performance of their respective function. Integrating all the performance metrics of all the functional verticals will give show the cumulative performance of the organization as a whole. These metrics are called key performance indicators (KPIs). Hence, these KPIs are tracked periodically for tracking the health of the organization. However, the frequency depends on the type, complexity and level of competition prevailing in the industry.

?The KPIs for Finance vertical are as under:

1. Gross margin: is the percentage of revenue remained after paying for all the variable costs for the product sold. In other words gross margin is the percentage of revenue remaining to pay for the overheads and financial costs.
2. Debt service coverage ratio (DSCR): is the measurement of a firm's health in terms of cash availability from operations to pay the current debt obligations (principal + interest). In short it is a measurement of firm's financial health whether it can service its long term debt.
3. Net profit margin: is the measure of profitability of an organization. It is actually the efficiency of organization to utilize the revenue to pay the overheads, financial costs and statutes.
4. Quick ratio: is the ratio of current assets to current liabilities. It is the cash management efficiency of the organization. If the ratio is more than 1, then the organization has enough liquid assets to cover the outstanding bills (current liabilities). For small and medium scale enterprises this is one of the most vital KPI.

The KPIs for Marketing and Sales are as under:

1. Market share: is the metric for performance of the marketing and sales team. It is direct measurement of brand awareness amongst the consumer group.
2. Customer acquisition cost: is the cost incurred by marketing division to acquire a new customer. It can be calculated as the total marketing and sales cost divided by the total number of new customers.
3. Customer lifetime value: s the revenue a business can reasonably expect over the average lifespan of a single customer. It can be calculated as product of average sale per customer, average number of times the customer buys the product and average lifetime of the customer.
4. Loss of revenue due to stockout: is a metric which is important especially in case of FMCG/ FMCD businesses.

Apart from these there are several digital marketing specific KPIs like traffic-to-lead ratio, lead-to-customer ratio and digital marketing ROI.

The KPIs for Operations are as under:

1. Capacity utilization: is one of the key metrics based on which operational performance is measured especially in manufacturing setup. It is the ratio of total capacity utilized (rate of production multiplied by machine hours) to total capacity available.
2. Cost of production: is the direct variable cost to produce per unit of product. It can be calculated as total raw material cost divided by the number of products produced. In case of service sector it is the total direct cost divided by the number of services rendered.
3. Raw material and finished goods inventory level: provides the planning efficiency of the operations and supply chain management team.
4. On time in full (OTIF) delivery: is the percentage of deliveries which has reached the respective customers against their orders on time and in full to total number of orders received. This is a vital measurement when an organisation is dealing with large number of stock keeping units (SKUs) and an order typically consists of multiple SKU of different quantities.

KPIs of HR and IT division are more of less standard and every organization keeps a track of the same. But that is not the case with financial, operational and marketing KPIs. Organizations often overlooks these vital signs resulting in inefficiencies and losses.