Non-Financial Have Impact on Financial Performance

It is irrelevant if KPI focus on financial or non-financial measurements. The success of a business depends on both of them, and should be considered priceless by the businesses. The financial Key Performance Indicators focus on measuring business efficiency. It is good to look at profit and loss statements to know the largest of them, and therefore most critical to focus on. Every business has to prepare for financial overview – income statements and balance sheets – using the tool that calculate all financial business performances.

A corporation can use many financial measurements. Every small business will impulsively want to monitor profit, cash flow and market share. Market share is knowing business’ sales in comparison to other business in the same branch. A business that does not measure profit will lack the ability to know if company has made profit or not. If the business is in retail sector, then the business owner needs to monitor capital expenditure, expected return, customer satisfaction, and sales per square meter and profit per square meter.

It is important to do cash flow measurements. It is knowing how much money passes through the business. How these are used, depends on the analytical research. Another is the business performance in non-monetary areas. It is important to socially and responsibly satisfy public demands. The non-financial KPIs is about ethical, social and environmental performance. However, it can still effect business’ financial performance. A business’ ethical performance is measurable by employees’ morale turnover.

There are different ways to measure employees’ satisfaction. It is easier to measure employees’ morale in a small company than in a larger organization. However, it is possible. Smaller businesses measure employees’ satisfaction by asking staffs to complete regular surveys that focus on their satisfaction, motivations and give room for improvements. This simplify the monitor and measurements of the non-financial areas.  Larger organizations find it easier to measure the satisfaction by noticing quantity of employees’ absence.

It is also measurable by using the number of employees’ replacements (staff turnover). Unhappy employees’ motivation is usually low, which affect productivity, and may lead to poor customer service or badly made products. This will effectively reduce customer satisfaction and revenue.

The impact measurement is possible in different ways, and each method will be up to the company. The non-financial performance have great impact on financial performance of a company. This makes them equally important.