Pressured to Track KPIs? Why Your Accountants Can’t Deliver and What Must Change.

The Tough Road of Measuring KPIs

You've read my articles on KPIs, you want to track them. You went to your accountants and asked them to get you the data monthly. It's been 5 months and you don't have customer profitability, employee billable hour cost, customer acquisition cost, etc. Let’s make this clear – odds are, you are NOT equipped to get this level of data now. It will take several months of making operational changes to enable your team to track the data you need to measure the performance of your business. You can’t end up with a meal without getting the ingredients and cooking them (I love metaphors). Here is a short checklist of the minimum processes you need to engage in to get quality and insightful data out of your business (this does not include data related to inventory or manufacturing).

To Do List

1. Identify your services (and products) and their fixed or hourly prices.
2. Make sure your client invoices are created in a system where you set up these services/products and select each one as you populate the invoice, listing quantity of services (e.g. number of hours) and the price per unit to get to total. Doing so will enable you to parse revenues by hours, clients, projects.
3. Bonus: If you can add a separate field to invoices (which can be hidden from client view) listing the employee name, even better, you will add the ability to assign revenue to an employee easily. If you can use another field for Project #, you will be able to assign revenues to projects easily.
4. Implement a timesheet system for every employee that provides services to the client (not overhead staff).
5. Have them track time by project, client and by services identified above.
6. Split payroll for service employees using timesheets to projects, clients and services monthly. Enter this detailed data into your accounting system, tagging each line with a client, project and service.
7. Split all other cost of good sold whether supplies or services, whether purchased or provided by vendors, to projects, clients and services. Enter this detailed data into your accounting system, tagging each line with a client, project and service.
8. To properly track marketing related KPIs, have the sales team track their time spent on new vs renewing customers. They can also track time by client and campaign.
9. Make sure to assign all expenses to a department so that you can isolate all marketing costs easily.
10. If you're trying to measure marketing campaign ROI, you must tag revenues or customers associated with the campaign in your systems in order to pull the data out later.

The main idea here is that you can't get insights out if an accounting ERP if you haven't put detailed data in. Track the details and you will be able to generate amazing reports. What details need to be tracked depends on what analysis you are trying to generate, so work backwards. Here is the order: a. think about the decisions you need to make, b. consider what data you need to make those decisions well, c. identify the components that make up that data (like revenues and employee cost broken out by client), d. change processes to track those components, communicate them to accountants and get them systematically recorded in the ERP.

Boom, life changing.