For businesses looking to grow, the role of accounting services is now much more than the number crunching and compliance box-ticking of the past. A great accountancy firm offers clients all of this, but also provides key insights and strategic guidance that helps them make data-informed decisions about their business focus and plans for the future.
By using the right accounting key performance indicators (KPIs), clients can see a clear picture of where they are right now and also develop a roadmap to get them to where they want to be. By offering KPI-driven advisory services, accounting firms can deliver more long-term value to clients.
In this guide, we explore why KPIs matter in advisory services, how accountancy firms can choose the right KPIs to make a key difference to clients and some accounting KPI examples that could provide a foundation for your service evolution.
Jump to
Why accounting firm metrics matter for advisory services
KPIs are so important when offering accounting advisory services because they essentially tell the story of the business through data. Advisory services become meaningful when accountants choose the right KPIs to track and interpret, because:
- They move the conversation from historical reporting to a strategy that looks to the future
- They highlight opportunities and risks that might not otherwise be considered
- They provide quantifiable progress towards business goals, which helps make the data and the objectives more tangible for stakeholders
- They demonstrate value in ways that those with no business finance knowledge can understand.
How to choose the right KPIs for effective advisory services
Not all KPIs will offer the same level of usefulness to every business, so the right ones to benchmark and track for maximum insight will depend on variables such as the client’s business model, industry, size and goals. However, there are some accounting KPIs that apply to most (if not all) businesses, and these can help to build a true picture on which your advisory services can thrive.
We’ve outlined some common accounting KPI examples below.
Accounting KPI examples
- Net profit – the revenue left after all expenses have been paid
- Net profit margin – measuring how effectively the business is able to generate profit from overall revenue
- Gross profit margin – helping to measure whether the client’s goods or services are priced appropriately
- Sales growth – comparing sales figures over time to help determine business growth rate and highlight seasonal fluctuations
- Product or service performance – looking at how specific products or services are selling (and their respective profit margins) can help businesses better prioritise their sales strategies
- Current ratio – measuring how much more the business is earning than spending over various time periods
- Accounts receivable ageing – tracking any outstanding payments from customers/clients in chronological order to help identify potential cash flow risks
- Staff productivity – measuring the contribution of each employee or team to business revenue.
Other useful KPIs for some businesses, depending on what they do, can include tracking and measuring more operational elements, such as:
- Customer acquisition costs
- Lifetime value of a customer
The key when choosing KPIs is to ensure that they align with your client’s goals and ensure that you accurately benchmark these metrics early, so that progress can be measured effectively.
Turning accounting KPIs into advisory value
While having the data is essential, it only becomes valuable when the information is interpreted and acted upon. Once you have determined which KPIs provide the necessary data to measure against your client’s business objectives, you can:
- Benchmark against industry averages or direct competitors (when possible)
- Create dashboards that give a visual representation of the data and make it more accessible for your clients and their stakeholders
- Highlight any trends or triggers identified, with patterns or events that have had an effect on past performance and could occur again
- Provide actionable recommendations to move the needle on each KPI, e.g. renegotiating contracts with suppliers, making changes to product/service pricing, prioritising certain areas of the business for marketing budget etc.
- Set measurable targets for these KPIs to help track progress over time
Common Accounting KPI pitfalls
While utilising KPIs strategically can bring an extra dimension and value to your advisory services, there are some pitfalls that you can easily come up against when putting the fundamentals into place. These include:
- Tracking too many KPIs: More data isn’t always better, as you could be spending time and resource on measuring things that don’t ultimately make a difference to the client’s goals. Identify your core KPIs and focus on these to help drive your client’s decision-making.
- Relying only on historical data: Past performance is always important to bear in mind, but it won’t tell the full story. Combine historical analysis with a future-focused forecast.
- Giving unrealistic recommendations to clients: Knowing your client and understanding their capacity for change is essential to a successful advisory relationship. The actions you recommend that they take must be realistic for their specific resources, skills and time available.
- Not following up: KPIs need to be relevant and impactful on the wider business goals to be truly valuable. Things can change within a business over time, so it’s important to regularly review the accounting KPIs set with clients to make sure they are still the best things to track and measure.
Scaling advisory accounting services with strategic outsourcing
Building new or improving your existing advisory services for clients is undoubtedly high value, but it takes time and focus to roll out, which is something that many accountancy firms find in short supply.
Outsourcing some of your core accounting services to a trusted partner can free up your in-house team to focus on the advisory work instead, enabling your firm to scale without taking on the expense or risk of recruiting new staff.
With specialised expertise, the right outsourcing partner can help you to deliver all of your ‘bread and butter’ services to your clients efficiently, at your usual high standards, helping your firm to spend more of your time strengthening client relationships and bringing more value to their businesses.
If you want to explore how outsourcing could help your firm improve your advisory services without compromising your standards or reputation, we’d love to talk. Book a call with our team today.
