The Battle 🥊💪🏻🥊of the #’s KPI’s vs Benchmarking? Align 🤩the Two to Monitor and Evaluate Your Data to Help Improve Business Performance👍🏻👍🏻✅💰
Our firm is working with a medical practice group, a consulting client; who is looking to understand their business performance, identify weaknesses and grow in the right direction. Based upon need and staff expertise, their practice seems to be doing really well. Their patient base is growing, their staff is experienced and their patients are happy working with them. On first glance their medical practice is thriving and as such, should be really profitable, BUT it is showing a loss on paper. Do the number’s lie? Is the business not doing well? They are a specialty segment of a large medical office. We are looking to help them determine if the overall company overhead allocations are fair and accurate or are there other reasons for concern.
Many business owners “feel” their business is doing well, then sit down and analyze the data and find that the numbers do not support their belief or expectations. There could be a simple explanation, or some underlying issues that are not so obvious.
Remember the data we work with or analyze must be accurate in order for the financial statements to be meaningful in order to generate actionable behavior.
The key performance indicators (KPIs) for one company will invariably be different from the KPIs of another firm. What both hypothetical companies share, however, is the challenge of selecting which KPIs are best suited for measuring the goals and progress of their particular business model.
Benchmarking allows companies of similar sizes, in a similar geographic area in the same industry to compare line items as a per-centage of gross receipts, patient mix, net profit, patient satisfaction, operational costs, etc. We use benchmarking along with KPI reviews to help guide our clients with their decision-making and identify opportunities for resource optimization.
Entrepreneurs have a vast array of reports and data sets from which to choose and select from, but that data needs to target those specific areas that are most critical to answering the questions that managers need so cogent business decisions are made. As such, effective managers are able to distill down the essential information that is hidden deep within the mounds of data that emerge from an improperly targeted search.
We look to compare client KPI’s with benchmarking data to help pinpoint outliers within the financial statement. Once potential issues are identified we can target those areas and determine if and what improvements can and should be made.
What Are Key Performance Indicators?
Key performance indicators are the tools business organizations use to define their goals and establish quantitative measurements designed to determine whether any progress is being made towards those goals. They provide data that can be used to spotlight performance characteristics across a variety of matrices such as financial performance, customer relations, marketing efforts, and even employee productivity.
- Financial Performance: At the end of the day, the bottom line is why we are all in business, and understanding how well your financials are doing is the equivalent of knowing what is going on in the center of your car’s engine when it’s rolling down the road. For instance, if you are losing sleep at night over whether or not your latest marketing plan was worth the check you signed at the bank on Monday, you will want to explore your Return-on-Investments (ROI) with a detailed ROI KPI. Conversely, a KPI can highlight underperforming net profit margins or lackluster revenue growth rates, and the information obtained can present valuable insights to ensure the meeting of the company’s original financial goals.
- Customer Relations: As noted, a profitable bottom line is the ultimate goal of businesses, and customers are the key to achieving enviable sales numbers. As such, understanding what motivates your clients provides inestimable advantages to the entrepreneur who knows what they are looking for. Utilizing customer relation-focused KPIs, medical practitioners and other business owners can track levels of patient or customer engagement and subsequent retention rates. If patient satisfaction scores are sagging or turnover rates are high, the worried business owner can target their reports to help develop meaningful responses to address these lapses.
- Marketing Efforts: Without a viable marketing plan, few businesses can expect to prosper. With KPIs designed to highlight marketing performance, you can break down your cost per lead, brand equity positions, conversion rates, social networking footprint, and more. Get the most out of every marketing dollar by discovering what is working and what is not moving you towards your sales goals.
- Employee Productivity: While your marketing functions are designed to drive in the patients or customers that you are hoping will add to your bottom line, your employees are typically tasked with closing the deal. Indeed, when you are tallying up your operating expenses, locating, screening, hiring, and training new employees looms large in any budgetary considerations. So, using KPIs to measure employee performance just makes sense. Savvy entrepreneurs use KPIs to monitor the average revenue per employee, engagement level, and average employee tenure, to name just a few of the reports that can be tailored to get a feeling for the pulse of your workforce.
Final Thoughts/Recommendations:
Good data, a determined team and willingness to review and evaluate the current performance of your business can help you improve the performance and profitability of your business and the mood of your staff. Empower your business with help from a knowledgeable accounting firm, who is familiar with your industry. We at A. Parness Company love to work with our clients on planning and then help them set goals and keep them accountable. Check out this link on our website to “HOW WE WORK” for our three step process.
Understanding and effectively utilizing key performance indicators and industry benchmarking data is a crucial aspect of successful business management. Whether you’re striving to optimize your financial performance, enhance customer relations, fine-tune marketing efforts, or boost employee productivity, the right KPIs can guide your decisions and drive growth.
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FYI: At A. Parness Company CPA, we specialize in partnering with businesses like yours to provide insightful financial guidance, strategic planning, and comprehensive support for achieving your goals. Our experienced team can help you identify the most relevant KPIs for your business, ensuring that your decisions are well-informed and aligned with your objectives. If you’re ready to take your business to the next level and harness the power of KPIs, reach out to us today. Let’s work together to pave the way for your business’s success.