Distribution accounting software helps distributors track valuable financial information. This includes key performance indicators (KPIs).
KPIs may be divided into two groups:
Although industries may focus on slightly different KPIs, there are a relatively small number of KPIs that companies focus on for maximum impact. Historical KPIs are essential to note, for they enable comparisons of current progress to past efforts. Often such comparisons yield crucial insights into what worked before or what changes were made to improve outcomes.
Predictive KPIs use leading indicators to project future performance. Predictive KPIs for distribution can include economic indicators, demographic trends, or data specifics to the industry in which your business operates. Examples include housing trends, agricultural futures, and similar data.
The Three KPIs Every Distribution Accounting Software Program Should Include
Most distribution accounting software programs provide executive-level dashboards with graphic interfaces that enable users to showcase important KPIs on their primary dashboard. The following are three KPIs worth noting and following from your distribution accounting software which can significantly impact your business.
- Inventory Turnover Ratio
Among the top three KPIs for distributors, the inventory turnover ratio is one of the most important to watch. Two particular inventory turnover ratios to watch include low turnover items and high turnover items.
Within the inventory turnover ratio are two additional metrics that managers can choose to monitor. These include open purchase orders and purchasing trends. Both metrics are highly relevant to the distribution industry. Acumatica enables users to create their view and customize the metrics so managers can see precisely the data they need to make informed decisions.
- On-Time Shipping Ratio
The second important metric to watch for a distribution business is the on-time shipping ratio. You can observe the on-time shipping ratios for individual warehouses, groups of warehouses, and specific periods, such as one year, two years, etc.
Comparing warehouse performance offers a different viewpoint and one that can lead to insights for improvement. If one warehouse regularly outperforms the others, it bears investigation. Perhaps the crew at that warehouse has come up with a process that improves their shipping ratio. If so, it’s time to document their work and share it among the other warehouses to replicate their success.
This is just an example of what the on-time shipping ratio KPI does and what it can be used for, but it shows just how powerful distribution accounting software can be, if used by managers to make improvements.
- Profitability by Item
KPIs related to profitability by item enable distributors to review the relative profitability of customers, markets, distribution channels, and products. The information gleaned from profitability by item KPIs can be used for strategic planning. Distribution accounting software enables users to sort massive amounts of data in the profitability by item category to generate top-level insights into the most profitable business areas. These areas, once identified, can be expanded for future growth.
New to KPIs? Your Quick Start Guide Is Here!
If you’re new to using KPIs, here’s how to get started:
- Download the free white paper from Acumatica: Key Performance Indicators for Distribution. It provides more insight into the KPIs available in Acumatica and how distribution businesses can use them to improve their operations.
- Choose 8 to 10 KPIs to monitor. Focus on those that will make the most significant impact on your business.
- Create a system and calendar for monitoring and utilizing KPI data.
Acumatica cloud ERP offers a Distribution Management Suite that includes KPIs and displays such as those described here. If you’re ready to switch to a powerful cloud-based ERP system, call for more information about Acumatica or a free demonstration.
With the right KPIs and distribution accounting software, the sky’s the limit for your distribution business. Download the free paper today and give us a call for a consultation. Contact us or call 678-456-6919 for more information.