Finance has a bad tendency.

A tendency to believe that as long as your overarching KPIs are good:

Your business must be doing really good.

But that is rarely the case.

Most businesses can figure out how to fix their macro KPIs:
➡ Cycle Time
➡ Inventory Turnover
➡ Cash Conversion Cycle
➡ Return on Assets.

To protect the overall health of your business.

But that’s not enough to find opportunities in the business.

It’s also not enough to have a competitive edge.

As even your competitors must have these KPIs in order.

As they are easier to notice and manage.

So which are the micro KPIs?

These are product-focused and operational KPIs.

eCommerce has had to rebrand them.

They did this as talking about costing and operational KPIs was too old-fashioned.

That most businesses don’t want to think about.

eCommerce has called it unit economics.

In the ERP world, it’s the same concept of costing your products.

Costing requires you to have:
➡ A deep understanding of your inventory
➡ Mastery of costing layers
➡ Alignment with how you move your goods
➡ Multi-dimensional data with your products.

It requires you to align all functions:
➡ Sales
➡ Operations
➡ Supply Chain
➡ Finance

That is harder than you would think for most businesses.

They might not be able to do this as they might feel that it’s not as important.

Or maybe afraid of doing it due to the departmental silos.

This is where the cross-departmental or brand leadership needs to wear the finance hat.

But in the traditional world, marketers didn’t understand or care about the finance or operational world.

So unless marketers are comfortable digging into ERP systems, they will never understand the true product profitability.

What are some of the micro KPIs that you have seen working in your organization that calibrated your macro KPIs further?

#KPI #ERP #CFO

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