In This Episode
Many business owners only look at their annual accounts, but by then it’s too late to make informed business decisions. In this episode, Paul explains why identifying and monitoring the right Key Performance Indicators (KPIs) can help you improve profitability and stay in control of your business.
Full Transcript
Hi, I’m Paul, founder of Paul Marks & Co Chartered Accountants.
One of the biggest mistakes I see business owners make is not knowing how profitable their business really is.
Preparing annual accounts is important, but it’s simply not enough if you want to effectively manage and grow your business. You need systems in place that allow you to produce regular management accounts—ideally every month, or at the very least every quarter.
The good news is that you don’t need to study every figure in a set of management accounts. Instead, you should focus on what’s known as Key Performance Indicators, or KPIs.
Every business is different, but most KPIs fall into three key areas:
- Sales
- Costs
- Working Capital
The specific KPIs you monitor will depend on your industry.
For example, if you run a hospitality business, one of the most important KPIs is your gross profit margin by product line. Successful hospitality businesses monitor this every month because even small changes can have a significant impact on overall profitability.
If your business is turning over around £1 million or more, it’s essential that you identify the key drivers of your business and monitor the KPIs that really matter—preferably every month, but at least every quarter.
That’s how successful businesses stay in control and make better decisions.
I’m Paul from Paul Marks & Co. Thanks for watching Paul’s Boardroom Minute. I’ll see you next time.
Key Takeaways
✔️ Annual accounts are not enough to manage a growing business.
✔️ Regular monthly or quarterly management accounts provide much better control.
✔️ Focus on the KPIs that matter most to your business rather than every figure in your accounts.
✔️ The right KPIs will vary depending on your industry but typically relate to sales, costs and working capital.
“Disclaimer: Paul Stankiewicz is the owner and principal at Paul Marks & Co Chartered Accountants which is the trading name of Paul Marks Ltd a Limited Company registered in England and Wales (registered number 4487645).This article is designed for the information of readers only and is the opinion of the author only. Readers should not act on any of the information contained in this article without seeking professional advice. Nothing in this article constitutes advice, nor does the transmission, downloading or sending of any information or the Material create any contractual relationship. Links to third party websites are provided as a convenience to the reader, Paul Marks Ltd does not control and is not responsible for any of those websites or their content. Paul Stankiewicz and Paul Marks Ltd accepts no liability or responsibility whatsoever for any loss or damage suffered by any user of the information contained on or accessed through this article or the Material downloaded.
