Tracking, documenting and improving performance is crucial for all businesses. One way to achieve this to set clear and structured performance indicators, which will help you to analyse and build on any success that you have.
Performance indicators normally do two things – they inform management about the efficiency of the company and they make sure employees understand the company goals. This second point is especially important. By aligning the performance indicators with the company targets you will encourage teamwork within the finance department.
There are so many performance indicators that you could employ to track the behaviour of your finance department that it is often hard to know where to start. Opsdog, a consulting firm, recently carried out research that established more than 150 performance indicators that provide useful feedback.
Obviously it’s impossible to track all of these, therefore it’s important to split the indicators into distinct groups. This way you have clear feedback from individual sections and departments. Whichever indicators you choose, you need to make sure they reflect the nature of your work; no two businesses will have the same performance indicators. They also need to be quantifiable. Below are some examples, but remember they can be adjusted or tailored to match the needs of your business.
These should form a base for many finance departments. They include:
A simple way to measure performance and make sure you achieve a clean audit report is to simply track that you are meeting deadlines of reporting and payments to stakeholders. If you secure a clean audit then it is an indication of financial management success.
The first measurements you take should be over the long term. Look at monthly or quarterly figures first before moving into shorter periods of time. It is also important to establish any issues between finance and other departments. It might be that there are problems not being flagged which are affecting the performance of the business as a whole. Helping to streamline the process can remove timely actions and cut costs.
This works both ways. It’s important to learn what works for your business first and foremost. This way you can tailor what you measure and adapt your response accordingly. You also need to make sure your workforce is constantly learning. This can be easy to do and as simple as making your employees read an article about your customers or the sector in general.
The main thing to consider is that the finance department is a service centre and you need to make sure that it is serving the people it should do effectively. By putting performance indicators in place that are realistic yet challenging, you should improve the output of your business.