O' KPI, O' KPI

With 2018 fast disappearing, thoughts have likely already turned to 2019. Budgeting season is now well underway, as you set your financial plan for the coming year, whether that be aiming for a percentage uplift on 2018 or you have started from scratch with a zero based budget.

So you now have your annual financial budget, but do you have stage milestones or smaller objectives to help you achieve the bigger annual picture?

Breaking down your annual budget into smaller milestone objectives is good practice, not only does this give you an important motivational boost when you hit these milestones through the year, but it also gives you early warning should you not achieve them allowing you the opportunity to pivot and re-adjust your milestones to allow you the best opportunity to maintain your annual target.

It is however important to ensure that your milestone objectives are measurable and that you are able to regularly review your progress towards them. But how do you do this?

The answer to this is to set up a suite of KPIs these as the name suggests give you an indication at a glance of how your performance compares to your budgeted aims.

These are often industry specific but can also be unique to your business. In retail spend per basket is a common KPI, in professional football wages to turnover is the most common KPI. As long as your overall objectives are dependant on the indicators you choose meeting your KPIs is a good sign that you are on target to hit your overall goal.

So what does this look like in practice? Lets take a look at an example:

Retailer X Ltd has set a budget which includes a 10% increase in sales. There are several ways in which this could be achieved, they could attract 10% more customers over the period however this is unlikely to deliver the objective on its own as some customers will spend more than others. They could also increase their spend per basket indicating that their existing customers are also spending more. In reality X Ltd will set aim to achieve a combination of both measures, and as such would measure customers served and spend per basket as their KPIs.

If you are in the process of setting your budget for 2019 or have already done so, have you broken this down into smaller milestone objectives? If you haven't and would like assistance to do so BR Accounting & Business Services can help. Contact us today to arrange your free, no-obligation initial meeting.