Building a good Finance KPI Dashboard requires you to consider the most important metrics to track and understand. Finance has hundreds of potential options; we’ve grouped together some of the most common and useful ones in this list.
Example Financial KPIs
We’ll start with the Financial KPIs that are generic and tracked by most companies. These are the ones you’ll always be monitoring in some capacity…
It goes without saying that your revenue is a key metric when looking at a financial KPI dashboard. It’s key for every type of business, from large corporates through to small charities.
This is an important financial KPI measured by most companies. Gross Profit is the amount of profit after deducting the Costs of Goods Sold (COGS). They are the costs associated with creating and selling your products and services. This does not include interest, taxes or operating expenses. To calculate Gross Profit, use the formula Revenue – Cost of Goods Sold.
Gross Profit Margin
Commonly used as a metric to understand the overall business performance, this KPI represents Gross Profit as a percentage. It’s calculated by (Revenue – Cost of Goods Sold) ÷ Revenue. This metric provides more insight than Gross Profit alone. Gross Profit needs to be assessed alongside Revenue to understand performance.
Net Profit is the amount of money left after all bills have been paid, so is clearly an important metric to measure for any business. The formula for calculating Net Profit is Total Revenue – Total Expenses. However, on a good KPI Dashboard you're more likely to see Net Profit Margin (discussed below).
Net Profit Margin
This is a percentage view of Net Profit and is used more often as a KPI to measure financial performance than just Net Profit alone. Similar to Gross Profit Margin, it’s calculated by Net Profit ÷ Revenue. A common comparison when assessing financial performance is to look at the Net Profit KPI vs the Gross Profit KPI from above in order to decide how your current costs are impacting profit.
EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization. It’s a very commonly measured KPI as it provides a snapshot of the operational efficiency of a business. As it’s often used in company valuations, EBITDA is an important part of any financial KPI dashboard.
Example Financial Sales Performance KPIs
Analysing revenue is an important part of any business reporting, so naturally there are a lot of KPIs that relate to this metric and the wider sales performance. Here are some examples…
Monthly Reoccurring Revenue (MRR)
Monthly Reoccurring Revenue is a hugely important metric for businesses where they are adding subscription-based revenue on a regular basis. Examples would include a membership society or a software-as-a-service product (SaaS). MRR is a key metric to understand the traction of the business.
Annual Reoccurring Revenue (ARR)
A slightly higher-level view of Monthly Reoccurring Revenue, Annual Reoccurring Revenue is the KPI to measure the reoccurring, contracted revenue each year. Like MRR, this KPI relates only to businesses that have some sort of subscription-based income.
Revenue per Employee
Revenue per Employee is a financial KPI often used to compare companies. It represents the amount of revenue generated per employee and is sometimes seen as a way to show how successful a business is at using their resources. It’s calculated by Revenue ÷ Number of Employees and is also known as Revenue per FTE (Full Time Employee).
Revenue per Customer
Similar to Revenue per Employee, this KPI looks at the average revenue produced per customer. It’s calculated by Revenue ÷ Number of Customers. Be aware that this metric could be misleading if you’ve one large customer and a high number of smaller ones. Take a look at our Complete List of Customer KPIs for more in this area.
Revenue Growth Rate
This KPI would almost always be measured on an annual basis, but may also be looked at more often depending on the type of company. It refers to the growth between the historic revenue and the current revenue. You’d calculate it by (Revenue – Historic Revenue) ÷ Historic Revenue.
Type: Currency or Percentage
Churn measures the amount of revenue lost over a period of time. It might be shown as the actual amount lost or a percentage of the total revenue. Clearly high churn is a risk to overall growth, so this is an important KPI to monitor.
Customer Acquisition Ratio
In our Complete List of Marketing KPIs we talked about Customer Acquisition Cost and how it can be used to track the spend required to add new customers. The Customer Acquisition Ratio KPI takes that analysis a step further with the following equation:
Customer Lifetime Value ÷ Customer Acquisition Cost
You can read more about similar KPIs in our Customer KPIs list and Marketing KPIs list.
Days Sales in Inventory Ratio
This KPI looks at the average number of days your business holds onto inventory before selling it to customers. It’s calculated by:
(Average Inventory ÷ Cost of Sales) x 365.
Inventory Turnover is a KPI that looks at how often your inventory is replaced. This is a metric to measure the ability to generate sales. To calculate the KPI you take the Sales and divide it by the Average Inventory. The full formulate would therefore be:
Sales ÷ ((Beginning Inventory + Ending Inventory) ÷ 2).
Example Financial Liquidity KPIs
These KPIs are often looked at in the context of financial stability and health. They focus on a company’s ability to cover it’s liabilities. Let’s take a look at a few examples…
The Cash Ratio is a KPI used to measure the ability to pay off the company's short term liabilities.
It’s calculated by: Cash and Cash equivalents ÷ Current Liabilities.
The Current Ratio is a financial KPI that looks at the ability for the business to generate enough cash to pay off debts when they become due and is generally used to warn off cashflow issues. It’s calculated by Current Assets ÷ Current Liabilities.
Quick Ratio or Acid Test
You may have heard about the Acid Test or Quick Ratio before, as it’s a well-known financial KPI that gives an instant view on the health of a company and short-term risk. It does this by illustrating a company’s ability to immediately pay their short term financial liabilities. This ratio is focused on the immediate state and is not looking into the future as the Current Ratio KPI does.
The formula is: (Current Assets – Inventories) ÷ Current Liabilities
Key is the exclusion of any inventories from the assets, meaning this focuses on cash that is accessible rapidly to address any liability. As such, it’s an important financial KPI that often sits within a KPI Dashboard.
Debt to Equity Ratio
The Debt to Equity Ratio is a financial KPI used to measure how effective a business is at using investments for a good return. A low result suggests profits are being made, whereas a high result may act as an alarm bell. The information this metric provides is how much debt has been run in order to reach profitability.
The formula for Debt to Equity Ratio is Total liabilities ÷ Shareholder’s equity.
Debt Service Coverage Ratio
The Debt Service Coverage Ratio KPI reveals how well a company can pay any debt accrued. The formula to calculate the DSC Ratio is Operating Income ÷ Total Debt.
Interest Coverage Ratio
Interest Coverage Ratio looks at how a company can pay its interest expenses. Similar to the structure of the Debt Service Ratio, the formula for this KPI is Operating Income ÷ Interest Expenses.
The Debt Ratio KPI looks at how much of the assets in a company are provided by its debt. This KPI is calculated by Total Liabilities ÷ Total Assets.
Operating Cash Flow
The Operating Cash Flow is the amount of money a business generates from operations. This KPI is important as it's a way to measure the success of your core operations.
Operating Cash Flow Ratio
The Operating Cash Flow Ratio KPI is the number of times a company can pay off current liabilities with the current generated cash. It's used to understand the financial health of a business. To calculate this KPI use the formula Operating Cash Flow ÷ Current Liabilities.
The Working Capital is cash that is accessible immediately in the business. It’s calculated by the formula Existing Assets – Existing Liabilities. This is a particularly important KPI when looked at in the context of your liabilities. 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.
The Burn Rate can be a scary KPI! It shows how much money the business is spending to operate and is usually done on a weekly, monthly, quarterly or annual measurement. When used in conjunction with other KPIs it can be an illustration of the financial health of the business.
A company's Runway is often closely related to their Burn Rate, illustrating how long the business has in the current cash position before it runs out of time and can no longer operate.
Cash Conversion Cycle / Net Operating Cycle
The Cash Conversion Cycle (CCC) is a KPI that measures how long it takes to convert input into the business, such as inventory, into revenue.
Example Financial Efficiency KPIs
Certain financial KPIs evaluate how efficient a company is, so let’s take a look at some of these…
Type: Currency or Percentage
Budget Variance measures the difference between the projected budget and the actual cost. This KPI is often represented as either the amount in currency form, or as a percentage of difference. Clearly if the variance is large, either positively or negatively, questions should be raised. It might be caused by something outside of your control, such as an external impact, or it could be a lack of analysis or market understanding.
Line of Business Revenue Vs. Target
Line of Business Revenue (LOB) vs Target is a KPI that measures actual revenue in a budget against the projected revenue. It highlights how effective the business is at planning and executing against those plans, which in turn impacts overall performance and stability.
LOB Expenses Vs. Budget
Line of Business Expenses vs Budget is a KPI that looks at the actual expenses vs the projected expenses. Similar to LOB Revenue, a large variation between projection and reality will result in problems for business performance. In both cases, early action is key to ensure a high variance does not disrupt the company.
Accounts Payable Turnover
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.
Accounts Receivable Turnover
Accounts Receivable Turnover is a KPI that looks at the speed at which your business collects payments due to it. It’s an important metric to watch - if the ART becomes too large it’ll begin to impact your ability to pay your own expenses, so this KPI is often watched keenly in companies that monitor their cashflow.
To calculate the KPI use the equation: Total Sales ÷ Accounts Receivable.
Current Accounts Receivable
This simple currency metric is the total amount owed to the company at the current point in time.
Current Accounts Payable
Another simple KPI, this time to look at the amount of money owed by the company.
Payment Error Rate
This KPI shows the percentage of total payments that had some sort of error on them. A high rate could show a team training requirement or the need for a new financial system. Whatever the cause, high error rates will be causing inefficiencies within your company, contributing to a larger cost of running.
Finance Report Error Rate
It’s not just payment errors that can cause disruption, financial reporting is another area that requires accuracy and precision This KPI covers the percentage of reports that have errors or require further analysis.
Accounts Payable Process Cost
There are a few variations of this KPI, but they all relate to tracking the cost of processing your payments. You’ll sometimes see this used in a measurement of a cost per invoice or measured on a quarterly or annual basis. It can be extended to the total cost of the finance function too.
Often the highest cost in a company can be the people and teams, so this KPI is used to understand the utilisation of resources. Any timesheet or chargeable per hour business, such as accountants or law firms, will find this a helpful KPI to monitor in order to see how much of the team time is spent on revenue generating tasks.
Asset Turnover Ratio
The Asset Turnover Ratio is used to evaluate how good a company is at developing revenue from their assets. The formula to calculate this KPI is Net Sales ÷ Total Assets.
Example Financial Valuation KPIs
Finally, the financial KPIs that look at valuation of a business. We’ve covered Revenue, Profit and EBITDA above, so now let’s take a look at some of the more specific KPIs…
Return on Equity
The Return on Equity KPI relates to how much profit is being generated for the shareholders. It looks at the net income against the net worth of the company. The formula being Net Income ÷ Shareholder’s Equity.
Return on Assets Ratio
Return on Assets looks at how effectively assets are used to generate profits. The formula for this KPI is Net Income ÷ Total Assets.
Book Value Ratio
The Book Value Ratio KPI looks at the value per share of a business. The equation for this KPI is Shareholder’s Equity ÷ Total Number of Shares Outstanding.
Dividend Yield Ratio
With the Dividend Yield Ratio we’re measuring the number of dividends to shareholders relative to the market value. The formula is Dividend Per Share ÷ Share Price.
Earnings Per Share Ratio
This KPI measures the net income earned for every share outstanding in the business.
The equation is Net Income ÷ Total Shares Outstanding.
Price Earnings Ratio:
With this KPI we’re comparing the share price in a company to the earning per share. The formula for this is Share Price ÷ Earnings Per Share.
So there are some common and important financial metrics to include in your financial reporting.
Remember, when setting your KPIs and building a KPI dashboard it's important to just focus on the most important KPIs for your team and your business. Do not have too many as that will result in a lack of focus and could be detrimental to results.
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