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Key Performance Indicator: Revenue Growth
Revenue Growth is a KPI used to measure how sales are increasing or decreasing over time. It is calculated by dividing revenue generated during one time period by the revenue generated during a subsequent time period, subtracting 1, and then multiplying by 100 to obtain a percentage. Generally companies calculate revenue growth year to year. Some companies track revenue growth from one month to the next, but this is only meaningful if the business is unaffected by seasonal factors. For companies that have revenue affected by seasonality, it makes sense to measure the growth rate in revenue for the month (or season) on the same month (or season) as last year.
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KPI of the Week: Perfect Order Rate
The perfect order rate is a KPI used by companies to measure how well orders are being fulfilled and shipped. It is calculated by dividing the number of orders shipped without incident divided by the number of total orders shipped during the same time period. The company must first define what constitutes an incident. Most companies include as incidents: damaged goods, inaccurate orders, and late shipments. An order containing any of these incidents would not be counted toward the orders shipped without incident.
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KPI of the Week: Utilization Percentage
A KPI for Service Organizations — The utilization percentage is a KPI used by service industry organizations to measure how many hours each person is spending of available work time on client time. It is calculated by dividing the number of billable time by the number of hours available to be worked. As a standard, the number of hours available to be worked will be number of days times 8 hours. Thus, a standard denominator for a year is 2,080 (52 weeks X 5 days X 8 hours).
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The Importance of Cash Flow
Cash Flow is the lifeblood of every business. You can have all the ‘Profit’ in the world but if you don’t have any Cash Flow it can be as inhibitive to your business as having no profit. Lack of Cash Flow can prevent you from purchasing items for sale at discounts, prevent you from purchasing needed Plant, Delivery or Office Equipment that is necessary for running your business. It can also prohibit you from seeking opportunities to grow your business. Throughout your software are tools to assist you with keeping up with your Cash Flow.
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KPI of the Week: Program Efficiency Ratio
A KPI for Not-for-Profit Organizations — The program efficiency ratio is a KPI used by not-for-profit organizations to measure how much an organization is spending on its primary mission rather than administrative costs. It is calculated by dividing an organization’s program service expenses by its total expenses. The organization’s program service expenses would be money directly spent to further the not-for-profit organization’s mission.
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KPI of the Week: Fundraising Efficiency Ratio
A KPI for Not-for-Profit Organizations — The fundraising efficiency ratio is a KPI used by not-for-profit organizations to measure how efficient the organization is at raising money. It is calculated by dividing the unrestricted contributions by the unrestricted fundraising expenses. The unrestricted contributions are the incomes from donors who do not specify where it must be used. The unrestricted fundraising expense is the money spent by the not-for-profit in order to collect the unrestricted contributions.
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Why Is Budgeting Important?
Creating a budget is not just an exercise that the CFO gives to the managers of the company to provide busy work to those already very busy. A budget is a comprehensive financial plan for achieving the financial and operational goals of an organization. Used correctly, a budget is the map of the company’s strategic plan. In creating the budget, the company is developing its objectives for the acquisition and use of its resources. Once in place, it becomes a valuable benchmark to determine how well the steps taken by management are ensuring objectives are attained.
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To Be, or Not to Be, in the Cloud
Organizations make daily decisions that better adapt their organizations to a changing external environment. These decisions revolve around four factors: people, processes, technology and records. Leaders of the 21st Century argue that the most salient of these factors is technology. In fact, the IBM Institute for Business Value recently conducted a study based on data collected from 4,000 C-suite executives worldwide.
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