 Hello and welcome to the session in which we will discuss key performance indicators known as KPIs. Well, maybe you heard of this saying, maybe not, what gets measured gets done and measure what matters. And this is basically what KPIs is all about if I want to summarize this lesson. So it's a measurable value. We're measuring something that's going to help the organization track progress towards specific goals or objective. So those KPIs, they're going to help us basically think of it as a measuring tool, helping us determine where do we stand toward a specific goal or a specific objectives. And we can use those KPIs to evaluate the success of the whole organization. We could use them to evaluate the success of a particular project or a particular team. Now bear in mind KPIs, they should be measurable as specific as possible and achievable. We can achieve them and they should always be aligned with your business goals. And KPIs can be broken into four categories. Before we proceed any further, I have a public announcement about my company farhatlectures.com. Farhat Accounting Lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions, as well as exercises. Go ahead, start your free trial today. No obligation, no credit card required. And the four categories are financial KPIs, customer KPIs, process KPIs or internal processes, people or employee KPIs and sometime in your textbook or in your CPA review course that might be called organizational growth. Now if you know anything about Farhat every time I have a list, I'm going to go over each item on this list explaining what financial KPIs is, customer process and people and given examples. Starting with financial KPIs. Those are very important because financial means money. They provide critical information about the company's financial performance, revenues, cash position, profitability, which are essential for making decision, planning and monitoring progress. What are some specific example? For example, you could measure revenue growth rate, measure the increase hopefully and not the decrease in an organization revenue over a period of time. This is a financial KPI measure or we could look at the gross profit margin or we could look at earnings before interest and taxes EBIT. So gross profit measure the profitability of an organization by computing the percentage of revenue that remain after accounting for cost of goods sold. Simply put sales minus cost of goods sold equal to gross profit. So if we take gross profit divided by sales, we'll get the gross profit margin and this is an indicator of how well we are selling and managing our cost of goods sold. Another set of KPIs are customer KPIs. Basically, this is again, if you want the money, they come all from customers. So customers is your source of money, a main source of money. It measures how well the organization is delivering value to the customers. Those KPIs will help the organization understand how well they are meeting customer needs because that's important. Customer expectation and preferences. Why? If the customers are not happy, you need to fix that. If you're not meeting their expectation, well, you need to do something about that. If you're meeting the expectation, you want to project future expectation. Now, how can you do that? How can you measure those KPIs? What could be some examples? You could do what's called customer satisfaction score, measure the degree which customers are satisfied with a product service or interaction. Now, how can you measure this? Well, you can survey them, you can ask them, you can interview them, give them feedback forms sometime on the phone when you call, they ask you to stay after the call has ended. The reason is they want to measure customer satisfaction. Social media monitoring, how long are they staying on your website, on your social media website, on your specific page on the website. You can also compute this score based on customer behaviors, whatever and any way you can repeat, any way you can measure this such as repeat purchases and reviews. If the customer is constantly buying from you, that's a repeat purchase. It means they are happy or you can look at the reviews if they left your reviews on Google or some other website. Net promoter score is another example. Measure the likelihood that a customer would recommend an organization to other. For example, you could just ask them, would you recommend me to others? And by doing so, you will get an idea of if they are satisfied or not satisfied. Now, bear in mind, to make sense of any KPI, you have to benchmark it. What's benchmarking? It means look at your competitors, look at the industry standards. And this way, you can identify any shortcoming, any weaknesses, because now you understand how you compare, how you stand against other people in the industry to identify area for improvements. And other KPIs are process KPIs, which measure the organization, performance in terms of its processes and procedures. Company have many different, various companies will, every company will have different processes and procedures. But you want to understand how well you are performing those key processes and procedures. So what are key processes and procedures? The things that you do that gets your work done, whatever business you are in, and try to identify areas of improvement. So process KPIs measure how well an organization is performing key processes. And those could be in a manufacturing industry, service delivery, or project management. Those are your, it means the key essential things that you do for your business. So process KPIs can be measured various aspects of the process, such as cycle time, how fast you are finishing the product, cycle time, for example, if you're in the manufacturing, what is the defect rate of every 10 or 100 units you're producing? How many units are defect? They're no good. Well, by doing so, you're measuring how well is your process, process cost, how well you are managing your costs, or how well you are utilizing your resources, resource utilization. So all those can be, can be some form of an indicator. And you can measure them, there are various sources, you can do data analysis, process mappings, statistical process control, run regression, so on and so forth. Just like with the customer KPI, you have to compare yourself to your peers, you have to compare yourself to the industry. And people or employee KPIs or organizational growth, as they, in some, in some courses, they call it, that's the best because people are the company. Here you want to make sure the organization performance in terms of its employee, you're measuring that performance. This helps the organization understand how well they are managing and developing their workforce because your workforce is everything, your workforce is the face of the company. And you want to identify areas for improvement. You want to assess employees performance, retention, development, how do you do that in various ways, measure various aspects such as productivity, how well they, how productive they are, quality through the quality of the product, attendance, if your work, you know, require attendance, for example, hospitals, you want to make sure nurses are showing up during their shift, adherence to company policies and procedures, you want to measure the employee satisfaction engagement, and of course their alignment with the organizational, cultural and value. So this is how you measure the various aspect of employee performance. Okay, and you can measure this, you know, mechanically, what you do is you can ask them, you can do a survey, you can do what's called 360 degree feedback, just asking them questions that basically answer everything about what they do. They can also be calculated using employee behavior, if you can do that. For example, if the employees are productive, if the productivity is up, you could assume, you could always assume that the employees are happy, the employees are well trained, because that's what you are concerned about. If you are retaining the employees, that's another good indication of the employees are not turning over. That's a great indication that your employees are happy, you know, retention plus productivity is a great signal. Again, attendance, if attendance is required. Again, you have to compare your performance to others in the industries, to competitors or to other people in the industry to determine how well or not well, you are performing on these measures. What should you do now? Go to Farhat Lectures and look at multiple choice questions. That's going to test your knowledge, because on the CPA exam or on the CMA exam, or in your accounting course, that's how they test you. They want to make sure they're giving you a term, you know what it is, they're giving you an example, you know, under which KPI it falls. What should you do? Invest in yourself. This is what I suggest you do. Take your education seriously. It's 30, 40 year investment, good luck and study hard. And of course, stay safe.