A good kpi should act as a compass helping you and

This preview shows page 20 - 22 out of 28 pages.

A good KPI should act as a compass, helping you and your team BSBMKG608 Assessment 3 Version: v18.0 Page 20 of 28 Developed by: Nortwest Pty Ltd Approved by: AM Issued: November 2017 Review: November 2018
Image of page 20

Subscribe to view the full document.

understand whether you’re taking the right path toward your strategic goals. To be effective, a KPI must: Be well-defined and quantifiable. Be thoroughly communicated throughout your organization and department. Actually be crucial to achieving your goal. (Hence, key performance indicators.) Be applicable to your Line of Business (LOB), or department. The trouble is, there are thousands of KPIs to choose from. If you choose the wrong one, then you are measuring something that doesn’t align with your goals. How, then, should you go about selecting the right KPIs for your organization? The best way to accomplish this is by researching and understanding some of the most important KPIs. This way, you’ll have a better understanding of which ones are specific to your industry and which ones will be of no benefit. BSBMKG608 Assessment 3 Version: v18.0 Page 21 of 28 Developed by: Nortwest Pty Ltd Approved by: AM Issued: November 2017 Review: November 2018
Image of page 21
18 Key Performance Indicator Examples & Definitions Financial Metrics 1. Profit: This goes without saying, but it is still important to note, as this is one of the most important performance indicators out there. Don’t forget to analyse both gross and net profit margin to better understand how successful your organization is at generating a high return. 2. Cost: Measure cost effectiveness and find the best ways to reduce and manage your costs. 3. LOB Revenue Vs. Target: This is a comparison between your actual revenue and your projected revenue. Charting and analysing the discrepancies between these two numbers will help you identify how your department is performing. 4. Cost Of Goods Sold: By tallying all production costs for the product your company is selling, you can get a better idea of both what your product mark-up should look like and what your actual profit margin is. This is key in determining how to outsell your competition. 5. Day Sales Outstanding (DSO): Take your accounts receivable and divide them by the number of total credit sales. Take that number and multiply it by the number of days in the timeframe you are examining. Congratulations—you’ve just come up with your DSO number! The lower the number, the better your organization is doing at collecting accounts receivable. Run this formula every month, quarter, or year to see how you are improving. 6. Sales By Region: Through analysing which regions are meeting sales objectives, you can provide better feedback for regions that are underperforming. 7. LOB Expenses Vs. Budget: Compare your actual overhead with your forecasted budget. Understanding where you deviated from your plan can help you create a more effective departmental budget in the future.
Image of page 22
You've reached the end of this preview.
  • Spring '17
  • Nortwest Pty Ltd

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern