What Are KPIs and Why Are They Important to Track?

Ever feel like your accountant is speaking a different language? Every industry comes with its own acronyms and lingo, and the world of accounting is no different. We use different terms to talk about how we’re tracking the financial health of your business, and one of the most important things we look at is your KPI.

What Are KPIs?

A key performance indicator (KPI) refers to anything you are measuring to determine the level of success (or failure) of some activity or investment in your business.

A good KPI needs to fulfill two criteria: it needs to be measurable, and it needs to measure a relevant aspect of your business.

For example, let’s say you decide to run ads online to promote your business. The most obvious KPI you would want to track for those ads is revenue for your business. Did you get a return on that investment?

But that’s just one KPI, and if you dig a little deeper and track other KPIs related to the ad, you can get more information on its effectiveness.

Some other KPIs you should look at include views, click-through rate (CTR), and the percentage of people who clicked and then scheduled a call or an appointment.

You might be making back the investment you put into the ads, but if only a small percentage of the people who view it ever click through, that indicates a problem. Either the content of the ad isn’t compelling enough to convince them to click through, or it’s not being shown to the right audience. When you track all the relevant KPIs, the data you gather enables you to find the areas that need improvement so you can make those adjustments and gain an even higher return on investment (ROI).

Why Are KPIs Important to Track?

We all have biases that prevent us from seeing the world the way it really is, including our business. It might be tempting to keep running an ad or printing fliers because we remember the one or two clients who came to us through that ad or that flier.

What we often fail to consider is whether that one client provided enough revenue to justify the investment we put into the ad in the first place. Or if other lead generation strategies have been more effective and deserve more of our resources.

Business owners who track all the relevant KPIs in their business have a clearer understanding of what’s working and what isn’t. That clarity enables them to make better decisions when it comes to growing their business. That’s where The Bookkeeping Doctor can help.

I’m sure it comes as no surprise that a bookkeeper is all about the numbers, but I’m not interested in numbers for the sake of numbers. I analyze the numbers so I can see the story the numbers are telling me. That story is the story of your business.

If you could benefit from a better understanding of your business’ story, let’s talk.