Seeking Advice on Crafting Effective KRAs and KPIs for Retail Business Success

Dear Friends,

I would be grateful for any support from those who have experience in developing targets, KRAs, and KPIs for the retail business. I would appreciate it if you could share indicative KRAs to help in further developing individual targets.

Thank you and regards,
Sanjib.

Retail Financial KPIs

Accounts Payable Turnover - Avg Accts Payable / (Cost of Sales / 365)

Accounts Receivable Turnover Days - Avg Accts Rec / (Credit Sales/365)

Acid Test Ratio - (Current Assets - Inventory) / Current Liabilities

Admin Cost % - (Administration Costs / Sales) * 100

Average Inventory - (Beginning of Period Inventory + End of Period Inventory) / 2

Break-even ($) - Fixed Costs / Gross Margin Percentage

Cash Conversion Cycle - Days Inventory Outstanding + Days Sales Outstanding + Days Payable Outstanding

Contribution Margin - Total Sales - Variable Costs

Cost of Goods - Retail Price - Markup

Cost of Goods Sold - Beginning Inventory + Purchases - Ending Inventory

Current Ratio - Current Assets / Current Liabilities

Ending Inventory At Retail - Beginning Inventory - (Sales + Transfers out + Return to Vendor + Markdowns + Employee Discounts + Shrinkage) + (Purchases + returns from Customers + Transfers In + Markups)

Gross Margin - Total Sales - Cost of Goods

Gross Margin Return On Investment - Gross Margin $ / Average Inventory Cost

Initial Markup - (Expenses + Reductions + Profit) / (Net Sales + Reductions)

Interest Cost % - (Interest Costs / Sales) * 100

Inventory Turnover - Net Sales / Average Inventory

Maintained Markup $ - (Original Retail - Reductions) - Cost of Goods Sold

Margin % - (Retail Price - Cost) / Retail Price

Markup % - Markup Amount / Retail Price

Net Receipts - (Purchases + Transfers in + Returns from Customers + Overages) - (Transfers Out + Return to Vendors)

Net Sales - Gross Sales - Returns and allowances

Retail Price - Cost of Goods + Markup

Return on Capital Invested - (Profit for the Year / Capital Employed) * 100

Sales per Square Foot - Sales per square foot = Total Net Sales / Squarefoot of selling Space

Stock Turnover Days - Average Inventory / (Cost of Sales / 365) number of days Total Asset Sales Ratio - Sales / Total Assets

Turnover - Total $ Sales for season / Average $ Inventory for season

Retail Customer Centric KPI's

Customer Gross Profit - Customer GROSS Profit = Customer Sales - Customer Cost of Goods Sold for a period

Customer Lifetime Purchase Value - Monetary value of each customer's lifetime purchases from the retailer

Customer profitability - Customer Profitability = Customer Sales - (Customer Returns - Customer Cost of Goods Sold + Customer Promotion Expenses + Activity Based Cost of Servicing Customer) for a period

Customer Purchase Freq Count - Count of customer purchases transactions over a period of time

Customer Purchase Value - Monetary value of each customer purchase during a period with an average value for all purchases for the period

Customer Reference question - A rating from 0 to 10 that indicates if the customer would recommend the store

Customer Sales by Segment - This formula is dependent upon defining customer segments (based on age, education, lifestyle, income, and other factors) and associating individual customers to specific segments

Customer Service Staffing - Face to face customer service staff count / total staff count

Visit to Buy Ratio - Sales Transaction Count per period / Visit Count Per Period

Hi Mihir,

The above is very informative. Can you please provide me with KPIs and KRAs for the Operations, Marketing, and Accounts departments of the retail industry? It's really urgent.

Regards, Shikha Jain

Hi Shikha,

Here are a few key important points for the Accounts department:

Receivables:

- AR Balance
- DSO
- Closing group amount
- Credit Limit Used %
- Total AR Overdue Amount

AR Aging:
- AR Aging 1-30 Amt
- AR Due 1 - 30 Amt
- AR Overdue 1-30 Amt

Payment Performance:
- AR Payment Days
- AR Weighted Days
- Time Paid Before Due

AR Transactions:
- AR Avg Invoice Amt
- AR Credit Memo Amt

Payables:
- AP Balances
- DPO
- Closing Group Amt
- Total AP Overdue Amt
- Overdue Amt to Total%

AP Aging:
- AP Aging 1-30 Amt
- AP Due 1 - 30 Amt
- AP Overdue 1-30 Amt

Payment Performance:
- AP Payment Days
- AP Weighted Days
- Time Paid Before Due

AP Transactions:
- AP Avg Invoice Amt
- AP Avg Payment Amt

General Ledger:
- Balance Sheet
- Cash
- Accounts Receivables
- Debt to Equity Ratio
- Current Ratio

- Asset Turnover
- AR Turnover
- AP Turnover
- Inventory Turnover
- Cash Cycle
- Fixed Asset Turnover

Cash Flow:
- Operating Cash Flow
- Investing Cash Flow
- Financing Cash Flow
- Net Cash Flow

Then we have for Profitability:

- Profitability Returns
- Margins
- Product Profitability
- Customer Profitability

Hi Geeta,

This is for generic purposes; it can vary for each resource level. What have you done in the past 6 months (measurable action items)?

Areas of Improvement:
- Goals for FY09-2010 (June to March)
- Business Development, Pre-Sales
- Customer Satisfaction
- Communications
- Development
- Testing
- Competency Development
- IP Development
- General - White Paper, Certification, Training conducted, etc...

Thank you.