Your Fitbit May Be Lying - Which Would Mean Your KPIs Are Junk
If you can’t measure it, you can’t improve it.
— Peter Drucker
::Together With Financial Cents::
Billing and Proposals is live in both the US and Canada now. Imagine the freedom of integrating this directly into your workflow!
How many folks do you know who have health trackers?
Ahhhh, but how many of them are using the data they are tracking?
And how many of them are skewing the data?
I had a friend who put their Fitbit on their dog - a rural dog that wasn’t leashed so it could run and chase, and play all day
I thought this was pretty funny, but certainly the data itself stank
I had another friend who fudged their manual inputs into an accountability app
Which, of course, fooled no one but themselves
Sometimes folks want reinforcement.
I know we all want to feel good about our good behaviour. Bu, for example, tracking your steps, including everyday activities rather than targeted ones, is not particularly outcome-focused data.
But whether the data is reliable (Oura rings, Whoop wristband) or human intervention is skewing it, it is worthless if it isn’t being actioned.
I have a few thoughts to share with you around KPIs.
One: Anatomy of good KPIs
You need to start by making sure your KPIs are clean.
Are they actionable, measurable and specific?
They should be leading vs. lagging indicators
Don’t overmeasure
Pick 5 - 10 core indicators for any given time frame
Two: Build your KPIs around current and desired outcomes
Weight is not one of my KPIs.
Feeling healthy is and fitting into clothes I like is my KPI ⬅️ this is the real outcome, not whether I weigh 120lbs (I probably don’t, I have no idea, since weight is not a KPI, I don’t weigh myself)
Take into account if you are stretching your old KPIs
Just because your old clothes “fit” as a size six does not mean you are a size six - you have stretched the material
Are you doing the same with your business KPIs and workflows?
Quick puzzler: Why do pants fall down more when you gain weight?
Steps are not a KPI of mine.
I am a short, slow little penguin runner, so I can get in more steps than someone taller with a longer stride length than myself
Distance is a far more accurate indicator of how my exercise regime is going
We have a client that we are honing in on profitable products so she can rationalize her offerings, simplifying her business and increasing her margins.
We are tracking income categories as they relate to the corresponding COGs accounts, and we supply % of income reports
In my firm, I am scaling what I want to do most. It’s building my bookkeeping business, and letting go of the industry teaching I do.
I need to understand deeply what income categories are bringing in what amount, and how profitable they are, to successfully change my service offerings
Of course, I care about top-line revenue, but it is the gross margin by income category that is my real KPI
Three: Set reasonable KPI expectations
We don’t promise to close our clients’ books by a specific day of the month.
We close 5 days after receiving info, not the 5th of the month
This sets us up for success in achieving our outcomes when we are reliant on clients to achieve them
We do tell our clients we will do their weekly bookkeeping on a specific day of the week.
They know to refresh their bank feeds and get their receipts in Dext a day ahead of that
This is not like a month-end close where all their tasks must be completed; it is simply keeping the books as current as we can, so if they don’t get all their stuff to us, it’s not critical
Four: Make it relatable to what you do and who you do it for
We are a bookkeeping firm that strives to free SMBs and accounting firm owners from the overwhelm of running their businesses. One outcome is to create freedom, knowing that their financial data is clean, current and reliable.
Sparkling Balance Sheet
As a baby bookkeeper, I focused on the P&L
As I grew, I focused more and more on the Balance Sheet
Now that’s where my KPIs come from - if the Balance Sheet is a piece of crap no other financial data is reliable
A KPI for us is that we get 5 or fewer YE Adjusting Journal Entries back from the tax professional
This is an indicator that the books were clean, current and reliable
This one is especially rewarding since we do catch up and clean up work, so it can be a challenging KPI in those cases
A deeper KPI is that the >5 entries are only for data we can’t supply, such as the corporate tax payable or government liability balances if we don’t have access to their CRA/IRS accounts
Five: Use technology to create accessibility and track your KPIs
It’s a wondrous world for this; we have access to so much magical technology. The key is using it to our full advantage.
KPI dashboards are in so many of our day-to-day apps
Financial Cents
This is where your firm KPIs can be effectively surfaced and tracked
To name a few, there are capacity management reports, effective hourly rate & time tracking reports (yes, that’s a thing, no matter what you have been led to believe), utilization, realization & profitability reports
QBO/Xero
This is where your and your clients’ financial metrics live
Be wary of the QBO dashboard insights, I have found them to be unreliable
Creating custom reports and reporting groups is effective and efficient
Google Sheets/Excel
Sync data from your accounting files and other apps to where your clients live (which may not be the accounting program)
Slice and dice it to create deeper, more meaningful data
If you take nothing else away from this article, make it that your KPIs must be tied to your desired outcomes.
Put some meaning behind your outcomes, give them the lift that drives you to make your KPIs actionable.
It’s not that you want to make XXX amount of money, it’s that you want XXX amount of money to [insert your why here - donate to meaningful causes, educate your children, renovate, travel…], but you want the freedom to only work XXX amount or provide XXX services.
I mentioned that I don’t have a weight KPI - which, like top-line revenue, I view as a vanity metric - but I most certainly have a fit-into-adorable-suede-fringe-skirt KPI.
Basing your KPIs on outcomes is the only way you can leverage technology and create systems that lead to clean, reliable data that gives you insights that you will use to build the business and life freedom you dream of.
Kellie :-}
