General about KPIs
When examining a company's performance, KPIs are traditionally divided into both external and internal metrics. External KPIs are always calculated from a company's accounting data, while internal KPIs can also combine data from external systems, such as the company's ERP system.
In many cases, most internal KPIs can also be calculated from accounting data when the accounts and cost centers are sufficiently detailed. Unlike external KPIs, whose data is publicly available from financial statements, internal KPI data delves deeper into accounting and business management data that is not public.
Read more about external KPIs in Finadeck's blog "KPI Tracking (why, what, and how) in plain language"
External KPIs
Through external KPIs, a company's performance is examined as if from the outside as a whole. The development of the whole is usually measured by KPIs concerning:
- scope and growth
- profitability
- liquidity
- solvency
which are useful for understanding, steering, and managing the whole, as well as in industry and competitor analyses.
Internal KPIs
Internal KPIs delve into examining different parts of the company, allowing for more precise analysis and steering of operations. Internal KPIs can measure:
- productivity
- effectiveness
- flexibility
- cost efficiency
- economy
Internal KPIs are often industry-specific. This is because, for example, a real estate company, an industrial company, and a restaurant have different variables driving operational efficiency.
In practice, a real estate company can set internal KPIs such as occupancy rate and each property's income and expenses to better understand the profitability of their investments.
An industrial company can measure efficiency by setting internal KPIs like production lead time and profitability by monitoring product group internal margins.
A restaurant business can measure overall profitability with external KPIs and understand which product group's sales to focus on by examining the profitability of different product groups.
Examples of internal KPIs
Sales
Sales Cost Percentage = Sales Costs / Sales Revenue × 100
Variable costs
Per-Unit Costs = (Labor + Materials + Direct and Indirect Costs) / Product Unit
Overtime Percentage = Overtime Hours / Normal Working Hours × 100
Margins
Function Margin Percentage = Specific Function Margin / Total Company Margin × 100
Fixed costs
Personnel Cost Percentage = Personnel Costs / Revenue
Productivity and efficiency
Productivity = Output Amount / Input Amount
Labor Productivity = Production Amount / Number of Employees
Quality
Error Cost Percentage = Error Costs / Sales Revenue × 100
Personnel
Absence Percentage = Number of Absence Days / Number of Working Days × 100
Employee Turnover = Resigned Employees / Average Workforce
