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KPI Report Template: Lean & Effective Financal Control

The aim of this article is to show how two aspects, namely KPI trees and simplification (lean finance), can be combined to develop a powerful KPI report template. In a previous article, we already discussed how a KPI tree can be designed. Now we go a step further and develop a clear and easy to understand KPI tree (or KPI report template) for an e-commerce business. Whilst doing that we keep in mind that we aim to practice a lean finance approach.

Basics of a KPI report template

To develop the KPI report template use the actual business model as the main logics behind all the figures. As business models can be very different from industry to industry or even within the industry, there isn’t the one general right report. Let’s assume we are management accountants in an e-commerce business. We could use the following logic on the income site:

Visits on the site x conversion rate x selling price

There is an amount of monthly visits to our site. From all these visitors some just browse around but some decide to buy our product. In other words, they convert and buy one of our products at a given price.

On the cost side, we could assume that the product itself has some costs (for example our purchasing price), we need to spend a certain amount on marketing for each unit sold and we have some fixed costs like employees or rent. Thus, we can use the following formula:

Fixed costs + units sold x (product costs + marketing costs)

As we try to generate a lean model, we may not cover every little detail of the business. However, we end up with a KPI report template that includes the main parts and interrelations and thus provides a result in line with the Pareto principle (with 20 % of the time, we cover 80 % of the correct logic).

KPI report template for e-commerce

Using the thoughts from above, we can now produce a KPI report template, putting income and cost side together. This could look like this:

KPI report template for an e-commerce business

Now you can simply add the relevant values to each box. I would recommend that you also use colors to indicate how favourable a value is. For example, indicate a rather bad value with a red box or a good one with green. If you have budgeted values, you can even include a deviation. Your result may look like this:

KPI report template for an e-commerce business including example figures

 

Everybody can see within seconds where the business is doing well and where not. Thus, the report can now be used to analyse and steer the business on an ongoing base.

Advantages

There are several advantages of using such a KPI report template. Firstly, it gives an overview of how successful the whole business is currently operating. Is the company producing a decent profit, is the conversation rate high enough, etc. Secondly, it makes it easy to understand the main drivers of the business and their basic interrelations. Thus, the KPI report template helps to find areas for improvement. Thirdly, although being a high-level report, it is always possible to deep dive in an area where room for improvement is assumed. Finally, it is a great result of lean finance. One report is generated that can be used to steer the business at the top level.

Conclusion

An actively used KPI report template can be a valuable reporting instrument with many advantages. Because it is based on the business model, it represents the company’s trading, showing basic factors and their interrelations.

 

Please feel free to share your experience in this field with me. If you haven’t tried it out yet, give it a go and let me know how it worked.

Adrian

I'm Adrian, a chartered management accountant with many years of practical experience. I studied strategy, financial controlling and entrepreneurship in Switzerland and England.

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