CFO’s duties in today’s volatile market conditions are critical. Innovative financial management solutions enable CFO’s to make strategic financial decisions smarter by analyzing the real-time KPI’s via built-in dashboards. The CFO’s key responsibilities as such budgeting & forecasting, economic strategy, treasury & controllership together form a strong corporate financial strategy. Monitoring key performance indicators in real-time facilitates CFO’s to predict risks like economic downturns, pandemics and forecast capital budgeting required to meet the organizational goals for every financial year.
Many organizations’ CFO’s could not invest in affording costly technologies, systems, and tools for budgeting & forecasting, monitoring financial transactions in real-time to take control over cash flow and capital management.
Our financial experts of Park Intelli Solutions collectively share the 32 financial KPI’s every CFO must keep track for accurate predictions and strategic corporate budgeting.
Every CFO Must Measure The 33 Crucial Financial KPI’s to Empower Corporate Strategic Decisions
Operating cash flow is the revenue generated by any business after deducting the operational costs. OCF is an important financial KPI used to predict the cash flow required for investments and expenses of your business operations. Compare the operating cash flow against total capital spent to evaluate if the cash flow is positive from your business functions.
Current Ratio is a financial KPI that helps to measure the company’s short-term liquidity. It defines an organization’s ability to fulfil all company’s financial obligations as such vendor payments, account receivables and current liabilities in one year. It is an investor indicator that is used to assess a healthy operating cycle of any business.
Quick ratio or acid test is the precise measure of a company’s financial health to evaluate organizations short-term assets to cover its interim liabilities excluding the inventories & prepaid expenses.
The burn rate is a financial KPI used to denote the investors and CFO’s whether the company’s operating costs are sustainable in the long run. It is a measure of cash utilization rate on daily, weekly, monthly, quarterly & annually basis from its cash reserves to generate operating profit for the respective period. It also indicates the average time period required to generate the cash reserves that are projected to spend with operating profit in a due time.
The financial KPI used to measure profitability is called Net Profit Margin. It indicates the percentage of revenue generated as profit through the business, after deducting all operating costs incurred from the overall revenue generated by the company.
It is one of the critical KPI’s that indicates financial health of the company is Gross profit Margin. It is a measure percentage of revenue generated against the cost of the goods sold after deducting from net sales. The higher the gross profit percentage indicates the capability of the organization to manage operating costs and/or reinvest for innovation & growth.
It is a financial KPI used to measure a company’s liquid assets such as cash reserves, short-term investments & account receivables to meet its short-term liabilities. It is a measure of a company’s ability to make cash quickly for interim solvency.
It is one of the critical financial KPI that measure the company’s outstanding cash reserves liable to receive as a result of services/products sold at credit for the client company as letter of credit or in the form of invoices with average due period of time to make payment. It is a measure of a company’s short-term liquidity factor to analyse its financial health. A high current account receivable indicates risks of loss for the company due to its inability to collect its receivables from long-term debtors.
A financial KPI measures the overall liabilities of the business for a short-term to all its creditors such as vendors, banks and financial organizations or provisional investors. A high current account payable indicates the risks associated with the company to meet its interim liabilities with its available short-term assets.
It is financial KPI that measures the rate at which the company is paying its suppliers and debtors. A slow rate of account payable turnover indicates the company’s capability to repay debtors or decreased credit ratings, while a fast rate of account payable turnover indicates how quickly the company depletes its cash reserves for vendor payments. Manage your accounts payable turnover ratio with more control to keep your business credit score on the rise.
This is one of the financial KPI’s closely associated with incremental costs associated with accounts payable process such as invoice processing exceptions, late payments, missed discounts, duplicate payments, invoice data errors, purchase orders problems, shipping documents mismatches due to human errors, manual processes and paper based document management in any organization. One of the primary KPI’s that endanger your bottom-line is the manual AP process which costs your business more than employee wages since manual invoice processing costs $15 per invoice on average. Automating account payable process helps businesses to spend just $2.36 per invoice saving $12.64.
A financial KPI used to evaluate the potential of a business to efficiently issue credit to its customers and collect its receivable payments in a timely manner. It indicates a greater risk if a company maintains a high account receivable for longer tenure. It fails to utilize its funds for its business growth rather offering an interest free loan to its customers which may also end up in huge write-off.
An important KPI used to analyse the sales potential of any business to quickly sell and replace its stock inventory within an average time interval such as days, weeks, or months. The low inventory turnover ratio indicates more problems to your business bottom-line such as high storage costs, outdated products, or product expiry risks, excessive capital locked as inventory storage affecting cash flow of the company etc.
One of the sensitive financial KPI’s that deals with company’s accounting discrepancies in budgeting for operations, assets, and liabilities. Minimal variation indicates positive variance if expenses accrued are well-padded in budget with integral funds in excess. Significant variation may also indicate adverse variance if the budget is too optimistic with poor decisions and predictions.
The KPI is used to measure quality and value of leadership time invested in budget creation cycle to research, plan and agree on a corporate budget strategy.
This financial KPI has substantial advantages to establish control over the use of resources, depending upon the expenditure detailing for each cost center. It indicates the CFO’s to plan cost cutting measures when the cost center exceeds expenditure detailed in the budget line item without supplemental program or performance information.
One of the primary KPI to make certain the financial planning insights of the budget strategy will create a better business impact. The less the number of budget iterations indicates how well the key business drivers are researched, implemented sound practices to set the right tone and approach to formulate strategic financial budget. Stats reveal top performers use 2 budget iterations while low performers use up to 9 iterations.
One of the financial KPI measures a business potential to increase its net sales revenue during a fixed period in comparison with previous period. The increase in sales growth indicates the business sustainability and profitable operations while the decrease hints worse strategic decisions.
DSO is a crucial KPI to determine the effectiveness & efficiency of a business’s credit collection efforts. A high average collection period indicates that its time to optimize your collection activities and establish stringent credit & collection policies, timely payment rewards to accelerate and motivate AR collections.
A significant KPI to assess the strategic supply chain value of the vendor. Lower the vendor expenses allude that the procurement team makes necessary adjustments through strategic sourcing to meet high value, low risk at lesser costs for the company. The increase in vendor expenses alarms the risks possessed in the supply chain that endangers profitability of the company.
The payment error rate is a vital KPI that directly impacts your day to day cash flow operations. Failure to authorize payments on-time, inadequate documentation and lack of appropriate references are the general causes of increasing payment error rate. When there is a sudden spike in the percentage of payment errors due to processing error, you need to reassess your payment processing system.
The internal audit cycle times is one of the KPI that highlight stakeholders and management to assess if the auditing goals are too broad or too numerous to measure in time. Long internal audit cycles indicate inefficient use of internal audit time, audit results are not timely reported and end up in stakeholder’s dissatisfaction.
A critical KPI that denotes the downside risk of your finance and business. The finance error report contains the number of inaccuracies that require investigation or clarification or references. Increase in the number of errors in financial statements may drag a thriving business to ground.
ROE is a prospective KPI used to measure a company’s capability to make higher profits efficiently from out of shareholders investments. The financial KPI distinguishes how much revenue a company generates for every unit of shareholders equity. The increase in ROE attracts more investments for the company’s growth goals.
DOE is a prospective KPI used to measure a company’s inability to make higher profits and accumulate debts against shareholders investments. The financial KPI distinguishes how much revenue a company loses due to increasing debts. The increase in DOE indicates the shareholders to break up or quit investments to prevent more loss.
The financial KPI is a measure of increasing costs associated with managing people’s work & planning the growth into every business department. The lower the process management costs indicates higher the assets for organizational growth.
The resource utilization KPI measures how profitable the professional service organizations are by comparing overall staff hours of the organization for a selected period against total billable hours of all resources in the same period. It indicates how well the human resource assets of the company are utilized properly for generating more profits.
The financial KPI helps to analyse the ratio of average full-time HR resources involved in payroll processing against the number of employees supported within the organization. Comparing the number of FTE required to support payroll function per total number of employees is directly proportional to the size of the organization. Enterprise organization implies a degree of scale and thus achieves efficiency.
One of the primary Cost KPI measures is the total cost consumed by the entire finance operations department inclusive of technology, systems, people, and process compared with total revenue generated. The higher the ratio of the finance function costs indicates that your finance operations needs to be optimized or automated to keep costs down. The best average ratio of finance functions cost is 0.6% of total costs while the worst average is 2.0%.
This financial KPI enables the investors and shareholders to assess a company potential of net profitability by eff the cost of each capital source by its relevant weight after tax cost. The higher the WACC ratio is a sign of increasing opportunity to maximize capital investments.
This investment KPI is a good indicator to assess a firm’s potential to allocate its capital under control efficiently on various profitable investments. It determines the growth rate of a company in comparison to past years to ensure if the company is creating or destroying value.
A key cash flow KPI to predict the net profit attributed to the overall future relationship with each customer associated with the business. It helps in measuring the duration it takes to recapture the investment required to acquire a customer.
CAC is a crucial business KPI that computes the average cost per new client acquisition by calculating the overall accumulated costs invested in a period to acquire a sum of clients over the same course of period.
Monitor. Measure. Control
Hope, all the above Financial KPIs will help you to improve your profitability in the upcoming years. Feel free to share if any KPIs you keep track, in addition, to offer additional value to the CFO Community.
Get assistance with Park Intelli Solutions on R2R services to get real-time financial insights with customized built-in financial KPI dashboards.
The Park Intelli solutions is established in the year 2011 by Anand Jesudass, a pioneer for his uncommon vision. The strong foundation placed by his extraordinary business acumen and relentless determination has seeded the group with a strong set of values and fundamentals.
After the mighty success for other concerns in the past 9 odd years, Anand has held those values closer than ever, aiming more on its business objectives surpassing conventional archetypes and setting new standards.
Our business perception
With ISO standardized norms, we develop and deliver the agile outputs to continue our venture.
Our people’s principles
Our team of tech-heads, savvy business people and creative minds are doers who work to enhance the business in 360 aspects
Vision and mission
The firm had its origin with a petite team of highly qualified and veteran professionals, constantly providing better business solutions to the clients. We at Park Intelli Solutions, strive towards the goal of delighting our clients and assisting them in attaining a competitive advantage across the board. We ponder in the development of good organizational capabilities to preserve a sustainable client base around the globe.
- Litigation Support
- Legal Research
- Contract Management Services
- Asset Research
- Appraisal Reviews
- Asset Valuations
- Investment Value Appraisals
- Valuation for Financial Reporting
- Lease and contract analysis
- Property Tax Consulting
- Remote CCTV monitoring
- Intelligence monitoring
- Workplace compliance audit
- Project monitoring
- Emergency response
- Monitor openings & closings
- Call Centre Support
- Email Support
- Phone Support
- Call Support
- Web Application Development
- Mobile Apps Development
- Custom Software Development
- Website Services
- Cloud computing
- IT security
- Network implementation
- Consulting and integration
- Personal computing
- Enterprise computing
- SEO Services
- PPC Advertising
- Content Marketing
- E-Mail Marketing
- Social Media Marketing
- Staffing Solutions
- Train & Hire Model
- Flexi-Contract Staffing