What Are The Leading Performance Indicators

Cash Flow

Leading Performance Indicators: Let’s start with the basics. To be successful in business management, you need to have reasonable control of your cash flow, as it is what determines whether your company is making a profit or a loss.

Its calculation is simple: everything that comes in minus everything that goes out. If you ignore it, you could have significant problems that make your company’s activities unfeasible, so follow it closely.

The most common causes of negative cash flow are the high value of raw materials and errors in calculating the selling price of your goods.

Sales Amount

Another significant indicator for any company is its sales volume. If you have a deficient sales volume, it means something needs to be fixed.

He may point out the need to update your products, improve quality or opt for other forms of sales, such as accepting instalments, for example.

Another situation that it indicates is the level of acceptance of your product in your sales area. You may need to modify it and look for other places to develop your sales.

This indicator may also indicate that the performance of your salespeople is compromised and needs to be analyzed. Collect information about your satisfaction with the company and, if necessary, review salaries and commissions.

Average Ticket

Monitoring the average ticket, whether per sale, per customer or salesperson, is a fundamental part of managing a company. Every customer has an acquisition cost, and increasing the value of your average ticket is a great way to reduce this cost and increase your profitability.

This indicator allows you to evaluate which customer profile is the most profitable and which seller generates the most results and also points out possibilities for cross-selling or related products.

Observing this metric, without a doubt, is an excellent way to increase your profitability without having to invest more and more in attracting new customers, simply making current ones spend more.

Production Time

You need to know how long, on average, it takes to produce a specific item in your catalogue and, from that, determine your company’s production capacity.

If you have identified that it only takes one hour to produce a batch of products and your company is taking longer than that, you need to stop and analyze your entire production process.

Look for bottlenecks and refactoring tasks that occur unnecessarily and fix them as soon as possible. Another point to be analyzed is the effectiveness of your machines and equipment.

Absenteeism And Turnover

If your company is experiencing problems with absenteeism or high levels of turnover, it is a sign that you need to pay more attention to your people management team. Most of the time, these problems originate from team dissatisfaction with working conditions.

If you expect your employees to perform well, you need to equip them with enough tools and knowledge to be able to perform their duties.

As in the case of low-performing salespeople mentioned above, this dissatisfaction may also come from the need for more amounts paid for a given role.

Inventory Levels

Poor inventory management is a recurring problem in many companies. Keeping an eye on stock levels for each of your products is essential to ensure good performance from your sales team.

High stock levels can represent a big problem for companies; after all, it’s cash, so the chances of breakage are high and a sign that a particular product needs to be reviewed.

In addition to avoiding losses, monitoring stock levels allows companies to develop strategies and promotions to encourage sales of these items.

What Are The Benefits Of An Efficient Management System?

Now that you know the types of systems and some indicators, you need to know what benefits an efficient management system can bring to your company. See some below:

  • integrate sectors: an efficient management system should integrate all areas of your company, providing a 360º vision and bringing more security and assertiveness to decision-making;
  • evaluate sales channels: the integration of all a company’s sales channels into a single tool makes it possible to compare the performance of each one and assess which are the best to invest in;
  • optimize working capital: by having complete control over your company’s activities, it is possible to discover the necessary levels of raw materials stock and reduce its volume to what is needed, saving working capital for other demands;
  • reduce rework: monitoring the metrics established in the management system enables an analytical look at all processes, pointing out rework in different sectors and how to eliminate them;
  • manage people strategically: maintaining the level of satisfaction of your employees is fundamental, and by adopting a management system, you start to reduce non-significant tasks and employ these employees in jobs that motivate them and make them see value in their work;
  • make safe decisions: once all aspects of your business are properly organized, it is much simpler to make a decision assertively and safely.
  • Reduce costs: after all the deficiencies identified by the management system have been addressed, the reduction of unnecessary operating costs becomes inevitable, and consequently, the company will experience an increase in its profitability.

How To Implement A Management System?

Just like any other essential activity of a company, before implementing a management system that meets your needs, it is necessary to plan strategically.

The first step is to assess what your company’s actual needs are in relation to its management because, as we have seen, there are different systems with different functionalities and different objectives.

Once this is done, you must evaluate which options are available on the market that suit your company and also check what structure is necessary for their implementation.

Currently, several management systems are based on the cloud, which eliminates the need for internal servers, brings more security to information and can also be accessed from different devices and from anywhere (mobility).

Also Read: HR Indicators: What Are They, And How To Choose?

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