Invoice processing cycle time measures the average time it takes to process an invoice from receipt to final payment. By tracking cost per invoice and early payment discounts you capture, you can further optimize processes and negotiate better vendor terms. From automating invoice processing to optimizing payment schedules, we look at specific metrics that can make a difference in the way you manage your finances. Without proper AP tracking, your business could face costly delays, increased errors, and lost opportunities to capitalize on early payment discounts. So, certain KPIs such as ROI, ROE, and more are not the best metrics to track long-term returns.

Here’s a quick guide that will help you set up your dashboard using the platform in minutes. By catering to the users’ specific interests and knowledge levels, you ensure the dashboard is a helpful tool rather than just a collection of figures. Choose tools that best represent your data and are intuitive for your audience to interpret, making it easier for them to understand and engage with the figures presented.

The solution provides the ability to assign targets for KPIs and define the importance of each, with alerts that tell you when a target is exceeded. A higher EBITDA suggests your company is efficiently generating earnings from its core operations. This is a widely used financial KPI that measures the profitability of an investment or project relative to its cost. Expressed as a percentage, ROI shows how efficiently your business is using its resources to generate returns. Are the metrics you use to track your finance team’s performance right for you? Every organization will need certain key metrics and the correct finance KPIs to measure its success.

Return on marketing investment (ROMI)

The Return on Equity KPI relates to how much profit is being generated for the shareholders. The Asset Turnover Ratio is used to evaluate how good a company is at developing revenue from their assets. Line of Business Expenses vs Budget is a KPI that looks at the actual expenses vs the projected expenses.

Close attention to these KPIs can help you focus on efficiency, cost reduction, and building strong supplier relationships. Automated systems automatically route invoices to the right people for approval, reducing delays and preventing unauthorized purchases. This ensures your data is accurate and frees staff to focus on more analytical tasks. Regularly review them to confirm their ongoing relevance, and if necessary, adapt them to your evolving business needs. This is the percentage of invoices that require manual intervention due to errors or discrepancies.

Growth Metrics

These KPIs don’t just stick to core finances like revenue or profits; they measure every data that has an financial kpi examples essence of finance in it. EBIT can be used to analyze the performance of business core operations without the costs of the capital structure and tax expenses impacting profit. Additionally, the burn rate tells investors if the company is able to increase revenues through marketing efforts.

Accounts Payable Turnover is a KPI that looks at the speed at which you pay your expenses. It’s a metric that can shed light on the health of the company and ability to pay debts, the efficiency of the finance team, and crucially the reputation the business will have with suppliers. The formula to work this metric out is Total Cost of Sales ÷ Accounts Payable. This would normally be measured and compared per time period in order to establish the trend of performance.

Sales growth rate = (Current net sales – Prior period net sales) / Prior period net sales x 100

The metrics below are typically found in the financial statements listed above and among the most important for managers and other key stakeholders within an organization to understand. Reporting KPIs should be clear, concise, and tailored to the audience’s needs. Use visual aids like charts and graphs to make complex data more digestible.

• These are indicators that can be measured by a number, percentage, or ratio.
• With this information, you can determine if you want to use them to fund your company’s operations and generate even more revenue.
• Incorporating financial KPIs into your business strategy not only provides clarity and direction but also ensures that every department and employee is aligned with the company’s financial goals.
• Selecting the right Key Performance Indicators (KPIs) is crucial for accountants to effectively analyze financial data and make informed decisions.

This gives you an understanding of how long cash is tied up in inventory before the inventory is sold and cash is collected from customers. This KPI helps ensure your business continues to grow at a target rate, measured by a percentage. Therefore, you would measure this monthly or on a 12-month rolling average basis. Therefore,  it’s often useful to measure how much revenue you are actually generating for each employee in your company. Monthly recurring revenue is a very popular financial metric for SaaS companies such as ours. This metric looks only at the revenue generated each month, which will re-occur with little to no additional investment required.

• Generally, rent or mortgage costs and sales or marketing expenses aren’t included in a COGS calculation.
• It indicates if you’re in a stable financial position and if you’re likely to be able to meet your short-term financial liabilities.
• If the outstanding amount has been there for a while, it means that your company might have a collection problem or can’t handle long-term debtors.
• Because this financial KPI deals with the costs directly related to the sale of your product.
• Liquidity metrics are essential for accountants as they provide insights into a company’s ability to meet its short-term obligations.

Debt-to-equity ratio

Key Performance Indicators are powerful tools that transform data into actionable insights. By understanding and implementing KPIs like sales growth, customer retention, marketing ROI, and operational efficiency, businesses can drive growth and achieve strategic goals. Whether in sales, marketing, customer service, or operations, the examples of KPIs discussed here highlight the importance of regular performance measurement in achieving business excellence. By effectively leveraging these indicators, organizations can not only adapt to change but thrive in a competitive market. In the context of financial analysis, selecting the right KPIs is essential. These metrics should align with the organization’s strategic goals and provide actionable insights.

Let’s look at what you should consider when choosing KPIs and how technology can help make tracking easier. Financial KPIs help you transform this data into a manageable set of critical indicators. You can customize the reports to fit your specific needs and drill down into the underlying reasons behind your financial performance. Being profitable is key, but if you’re not able to pay your debts or stay liquid, you won’t be around for long.

Financial KPIs

A higher gross profit margin indicates better control over production costs and stronger pricing power. Solvency KPIs evaluate the long-term financial stability of a company by examining its ability to meet long-term obligations. Important solvency metrics include the debt-to-equity ratio and interest coverage ratio. These indicators help accountants determine the company’s financial leverage and its capacity to sustain operations over the long term.

A higher ratio suggests greater reliance on debt, which could imply higher financial risk. Conversely, a lower ratio indicates a more conservative approach to financing, potentially signaling stronger solvency. KPIs facilitate transparent communication with stakeholders by presenting clear and concise financial data. This transparency is essential for building trust and demonstrating accountability.

Treasury Management Solutions

It compares the company’s debt with the total value of shareholder’s equity. A high debt to equity ratio indicates that the company is highly leveraged. This may not be a problem if the company can use the money it borrowed to generate a healthy profit and cash flow.