How are you doing?

When you ask yourself this question about your business, is the answer: fine thanks?

But do you really know if you are as profitable as you could be? Are your customer numbers growing?  Are your customers spending more?  Are you on track to hit this month’s numbers?

If you’re using Xero for your invoicing as well as keeping your bank rec up to date – then the answers to some of these questions is only a few clicks away.   Your accountant or financial advisor can help you to identify metrics and KPIs that are most relevant to your business and then Xero can help you track them monthly, weekly or even daily if times are tough.

In today’s product release there are a couple of extra ways to track your performance, so I’d like to take the opportunity to highlight these and a few others.  Not all of these will be appropriate or useful to your business, but some will.

Using the Executive Summary report:

  • Average invoice value *new* – this is a measure of whether your customers are spending more or less.  If your income is down for the month – is it because you issued fewer invoices, or because your average sale value was down?  If your average value was down – are you discounting too much or are people spending less?
  • Number of invoices issued *new* –  used with average invoice value, this will help shed some light on your sales trends
  • Gross & net profit margins – how profitable is your business?  Is it costing you more to make sales and run the business compared to the sales you are making?
  • Return on investment (p.a.) – is your investment in the company working for you – or would your invested money perform better if it were in the bank?
  • Average debtor & creditor days – how long is it taking your customers to pay compared to how long its taking you to pay your suppliers?
execsummary_frame

Using the Profit and Loss report:

  • Month to date progress *new* – this compares this month’s partial figures against the same period last month.  For example, if it’s the 20th of the month, then you can compare your month income and expenses against previous months as at the 20th to see if you are ahead or behind
  • Compare weeks *new* – compare income on a weekly basis to look for patterns.  Is all of your income being booked in the last week of each month or is it spread evenly through-out the month?
  • Actuals vs budget – compare your actual income and expenses for the month and year-to-date against your budget
  • Compare cost centres – using tracking you can compare income and expenses for each department, sales person, office or product-line which helps  you to identify strong and weak performers

Once you know which metrics to watch, its easier to start working on improving them. We’d also be interested to know what metrics you find useful, whether they are in Xero or not.

One Comment

Ben Lilley
September 8, 2009 at 10:19 am

Just wanted to say thanks for the tweaks, loving the new reports and partial payments. Also noticed a few subtle changes such as the hover states on the Flash graphs?

Most of all though just wanted to say; since you guys did the infrastructure upgrade Xero has felt much snappier (for me anyway) and reconciling accounts no longer hangs or feels laggy. I really appreciate that, speed is essential, nothing worse than a slow interface.

Keep up the good work :)

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