5 Financial Metrics Your Agency Should Be Tracking
Every agency should measure at least a few metrics whether they are in accounting (like Basis 365), retail, real estate, human resources, finance, insurance, cement manufacturing – the list goes on! However, each industry necessitates its own unique metrics to focus on.
Why Track Metrics?
Tracking metrics not only keeps you in the know of where your agency stands, but also provides clear insight for improvements, and it points out any lacking areas. Even though each agency measures metrics according to their specific needs, they all have one goal in mind – to stay organized and aware of their numbers for evolving improvements.
It’s impossible to stress how important and helpful tracking metrics is; so much so that Function Point states “a creative agency cannot succeed unless it carefully monitors its progress,” and “through reporting you will recognize your strengths and weaknesses faster.”
Also, the government requires its agencies to “develop strategic plans and performance plans that evaluate the success of the strategic plan” under the Government Performance and Results Act (GPRA). This is a wise rule; by measuring metrics, they can straightforwardly determine which agencies are performing well and how to utilize their budget efficiently (which is coming from the taxpayers’ pockets!).
How Often Should You Track Metrics?
Measure metrics daily, weekly, or monthly, depending on the relevancy and progression of each specific measure, and consistently review the numbers with a fresh perspective. Think of the metrics like a report card, where certain subjects are clearly in need for an inquisition while other numbers open doors to otherwise hidden growth opportunities.
What Metrics Should an Agency Track?
Without further ado, Basis 365 whipped together the general top metrics to measure throughout all industries, since we sincerely wish to assist all of our clientele.
A list of every ongoing job or task at any given time divided by client, project, account executive, and team, simply allows one to remain organized and knowledgeable about exactly what is going on in the moment and overtime. Additionally, this data include:
· Estimated hours it takes to complete a project versus the actual hours it takes.
· The monetary budget versus real expenses.
· Who is assigned to which task and if further help is needed.
Job summary report ensures everyone is on track, and if not, allows you to quickly realize to steer the team back.
2. Cash flow
Cash flow is vital for every agency to measure. Not strictly concerning accounts receivable aging, which displays how efficiently each client is paying, cash flow also portrays where and when the agency’s revenue is coming from (clients, investments, sales etc.), and where and when that money is going (expenses). This determines how much cash the agency actually has to run and expand.
3. Client income
Client income is another essential metric to track. More in-depth in the income sector than cash flow, client income tracks the average revenue per client; how much they are billed per month (or week however they pay), versus the predicted amount they would be billed.
Client income uncovers some important questions to intermittently ponder:
· Who is your clientele?
· How and where can you get more clients?
· Has your clientele shifted?
· Are you investing your money in the places that you earned it?
Don’t be afraid to cut some strings if you’re not receiving pay from a client; it’s not realistic to keep unreliable customers happy, and measuring client income as well as cash flow will point this out.
Turnover can refer to a few different things:
· How long a product is sitting on the shelf at a store.
· How often employees are replaced or leave.
· The total amount of money received in a specific amount of time.
When talking about a product on a shelf, a high turnover is wanted, whereas it is costly for a company to have a high
Understanding the cause of turnover rather than just the numbers is a huge asset to shaping an agency’s future, so look for trends in order to resolve any turnover issues.
Employees are essential to a well-rounded, healthily running agency, and it is cost and time inefficient to continually hire and train new associates. If there is a high turnover rate of employees, here are a few questions to investigate:
· Are newly hired associates leaving or have they been around for years?
· Are employees being trained well initially, and do they retain the information?
· How can you make your agency a better workplace?
5. Effective Marketing Techniques
Every agency should have a marketing plan in order to get more clients. First, pick a marketing goal (customer retention, upselling, brand awareness, etc.) then devise a plan.
Track the key performance indicators and know your lead sources (where your clients came from). Understand which marketing strategy works to prevent aimlessly spending money, Marketing is very helpful to grow an agency when done smartly, and measuring progress is the only way to maintain benefits.
These are the five essential metrics for an agency to measure, but there are more to track regarding your company’s specific goals. It cannot be reiterated enough how important measuring metrics is for an agency’s success, so start now, and don’t ignore the numbers!