Key performance indicators (KPIs) will help you and your outsourced accountant measure success in the areas of your business, especially where they are concerned. It will also determine effectiveness and areas that need recalibration. It can also help you weigh whether working with an outsourced full-time or fractional bookkeeper is actually helping you.
KPIs are determined based on your specific industry and business goals, but there are some basic indicators to help you get started through the processing time and audit lenses. In today’s blog, American-owned BPO company in the Philippines, MCVO Talent Outsourcing Services, shares the KPIs you can set for your outsourced bookkeeper or accountant.
Processing time
If you contract an outsourced accountant, chances are the bulk of their jobs will be dedicated to tracking and processing accounts receivable and accounts payable. These are the lifeblood of a company’s cash flow, so processing time for these two cannot be emphasized enough.
The effectiveness of an accounts receivable department will dictate a company’s profitability. If you minimize the number of outstanding receivables, you can avoid incurring bad debts or receivables that you can no longer collect. Two basic KPIs here would be:
- Days Sales Outstanding or the average number of days it takes for a company to collect a payment
- Receivables Turnover Ratio or how quickly a company turns its receivables into cash
A well-functioning accounts payable department, on the other hand, will ensure that all your liabilities are settled on time and that you have the most accurate information about your financial state. Here are two KPIs to keep track of:
- Days Payable Outstanding, which shows the number of days it takes for your company to settle bills.
- Invoice cycle time starts at the time the invoice is received until the payment is made.
In general, your chosen outsourcing firm must subscribe to “the quicker, the better”, without sacrificing accuracy. But there are other nuances to factor in, such as the Days Payable Outstanding. Expert accountants should be able to extend it long enough to keep the company liquid as much as possible but not too long that payments are already overdue and neglected.
Audit
Audit season usually sets companies in panic mode, but not when a responsible accountant is on top of everything. Since the audit findings verify financial statements and provide an impartial view of company procedures, these two KPIs are worth watching out for to ensure a smooth audit process.
- Payment error rate, or simply the number of errors made when making payments.
- Frequency of budget iterations or how often you revise your budget
These indicators represent the micro and macro views of your financial system. The most common payment errors are duplicate amounts or incorrect payment figures, the monitoring of which should be a regular undertaking and not just during audit season. Budget iterations, on the other hand, don’t just depend on your accounting and finance. Frequent adjustment can be due to inaccuracies on their part, but it could also be because of changes in overall business strategy. The reason should be put on record as well.
Work with an outsourced accountant from MCVO Talent Outsourcing Services that meets standard KPIs
The indicators above are only the tip of the iceberg. You can swim in a sea of indicators all day, as there are simply too many to select. If it’s not your forte, having an outsourced accountant will save you the painful process. Determining their performance should be a collaborative process, with them presenting to you the ones that matter the most to your business. When these are ironed out, you’ll notice an improvement in your accounting process. Book a call with MCVO Talent Outsourcing Services if you would like to work with our top-notch accountants who are well-immersed in global markets.
