Mike Copping is a recent recruit to Sift. Yes, that Sift - the very same that owns and publishes AccountingWEB. You have Mike to thank for keeping the site in tip-top financial health.
Copping isn't a full time recruit, working only three days a week. He works with other businesses, too. And naturally, he told AccountingWEB, there are tonnes of KPIs I use across all the businesses I work with, some of which are universally important, with a handful being specific to an industry or type of business.
"There's also some of the universal KPIs that matter more than others depending on the business. These little nuances are what make life as an FD interesting."
In Sift's case, the KPI of choice is invoice schedule. The KPI is expressed in pound value and it's updated at the same time each week for consistency.
"This metric is quite simply a total of what a business will invoice its clients in a given month/period," said Copping. "The value always excludes sales taxes and I recommend that you incorporate some future visibility into your recording of it (say 2-3 months).
"Just like with any KPI, being able to benchmark it against both a target (or forecast) and a historical figure such as the prior year, makes that number so much more contextualised and commercially valuable."
The final consideration of this KPI is how its communicated. "Email is slow and outdated," according to Copping. "Use Slack, Hipchat or Teams to spread the word quickly and give key people in the business a push notification that literally keeps their finger on the pulse. The target should be crystal clear and instinctively known to everybody without thinking.
So why is this KPI important? "Quite simply because Cashflow is king.
"When you invoice your clients, you're effectively asking them to pay you money. It's a different stage of the sales process and one that should result in your bank balance increasing! You're tracking invoicing value during the month and for future months whereas financial reports such as management accounts are always done after the month is over, so it gives you an excellent sense of how well the business is going to perform in the future.
"Finally, dependent on the industry, the way that revenue is shown (recognised) in the accounts can differ greatly from invoicing and so planning future cashflow based on revenue is not possible, but tracking invoicing most certainly is."