Key Performance Indicators (KPIs) are an important performance tracer for most businesses. Here are some tips from our Calxa Partner, Rhys Roberts at Viridity, on how to put together some KPIs for a modern Bookkeeping Practice.
Why KPIs Matter for Bookkeeping Practices
KPIs are often used to assess how well a business is doing. But in service-based businesses, especially a bookkeeping practice like Viridity, the right KPIs can do much more than track performance. They can help shape culture, guide team behaviour, and support strategic decision-making.
Inspired by a recent post on Calxa, we took a closer look at what KPIs really matter, why they matter, and how we use them inside our business.
The Standard 5 KPIs for Bookkeeping Practices
Mick from Calxa shared five essential KPIs for a bookkeeping practice:
- Average Revenue per Client
- Cost of Acquisition
- Churn Rate
- Lifetime Value
- Customer Value
These are critical indicators for the business overall, but they aren’t the whole picture.
What We Add at Viridity
We believe there are two essential elements missing from the typical KPI discussion:
- Additional KPIs that reflect day-to-day work and performance.
- Targets for each KPI to assess both business performance and individual contribution.
Additional KPIs We Measure
While many bookkeeping firms have shifted from hourly billing to fixed-fee pricing (and we were early adopters), we still use timesheets but not for client billing. We use them to measure performance and manage productivity.
Here’s why.
Mick highlights the importance of measuring Gross Margin as a percentage (GP%), but in a service-based business staff wages make up almost all of the direct costs for service delivery. It isn’t possible to measure GP% at a client / job level without capturing time at that level. If all you know is your total wages for the business, you have no way of identifying the different profitability of different clients, and there will without doubt be a range.
More importantly, the KPIs Mick listed reflect overall business results, which individual employees can’t directly influence. What they can influence is how they perform their daily responsibilities and how they support clients. Get those right then use appropriate KPIs to measure and review the business results.
Here are some of the additional KPIs we track:
- Time-Based Metrics
- Hours by client/job
Tracks if a client is within or over budget
- Hours by client/job
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- Client-related hours as a % of total hours (aka “billable ratio”)
Measures efficiency, not billing
- Client-related hours as a % of total hours (aka “billable ratio”)
- Service Delivery KPIs
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- Completing lodgements on time
- Responding promptly to clients
- Addressing issues with clients
- Minimising errors
- Team-Focused KPIs
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- Engagement in value-aligned projects
- Skills development and learning activities
- Support for colleagues
Why These KPIs Matter
These aren’t just internal metrics because they help us build a stronger team and a better client experience.
Control Matters
KPIs need to be tied to things the team can control. Nobody can singlehandedly influence “Churn Rate” or “Customer Value” but they can respond quickly to a client query, complete work accurately, or meet a lodgement deadline.
We want team members to be rewarded for what they do, not what they can’t control. That’s why our KPI system is structured around actions, not just outcomes or results.
So while I like Mick’s list of KPIs, I will continue to ask my team to complete timesheets, not for billing purposes, but to measure performance both at a client level and for each team member.
Don’t Measure KPIs for Their Own Sake
A KPI is only useful if it gives insight into what to improve. If you’re collecting metrics but never acting on them, you’re just generating admin.
“You can’t change the past. KPIs should help you act on the future.” Rhys Roberts, Viridity
At Viridity, the purpose of KPIs is to track what we can influence. We focus on day-to-day behaviours that lead to better results for our clients, which in turn improves our overall business performance.
How to Judge a KPI: What’s “Good”?
Measuring is one thing. Understanding what the numbers mean is another. So how do you know if a KPI result is good or bad?
Three Ways to Assess KPI Results
- Trends Over Time
- Is performance improving, staying flat, or declining?
- Benchmarking
- How do we compare to others in our industry?
- Budget Comparison
- Are we hitting internal targets and forecasts?
Example
Let’s say our client hours percentage improves by 2% this quarter. That’s great if we’re closing in on the industry benchmark. But if the benchmark is 25% higher, we still have work to do.
At Viridity, we draw on all of these approaches. Metrics like acquisition cost and churn rate are tracked over time using a 12-month moving average to see how we’re progressing year on year. I also review industry benchmarks to gauge our performance against comparable organisations, and I set an annual operating budget to guide the business as a whole.
What’s Next: Turning KPIs Into Action
There’s a cost to tracking KPIs: time, tools, data. So the value must outweigh that cost. That’s why we integrate KPIs into how we manage our business. We assess the performance of everyone at Viridity, including myself, using a range of KPIs that are largely centred on client outcomes and task execution, like those mentioned earlier. These are KPIs we can directly influence.
Real KPIs, Real Results
When each team member consistently does their job well and delivers excellent client service, the likelihood of achieving positive results for the business increases. There are no certainties, especially in a changing environment, but by doing our work to a high standard, we meaningfully improve our chances of reaching the outcomes we’re striving for.
Final Thought
One of the biggest mistakes we see in business is measuring results you can’t control, then blaming (or rewarding) staff for them. At Viridity, we measure what matters and what we can change.
That’s what turns KPIs from corporate jargon into meaningful tools for performance, culture, and growth.
About Author
Rhys is the CEO of Viridity, a boutique outsourced finance and digital advisory firm. Viridity empowers Australian SMEs with a high degree of financial complexity by providing accurate, real-time information through expert bookkeeping, payroll and management accounting to enable better decision making and power business growth.
Rhys and his team specialise in Calxa installation, training and customisation. If you want to get more out of Calxa, contact them to make an appointment.