There are many non-financial Key Performance Indicators (KPIs) that may be relevant to your business, below we have included some of the KPIs that are commonly used to track and monitor and control Financial Management.
As with all KPIs and goals in general, ‘less is more’, so ideally you will select the handful of KPIs that are of greatest importance to the business to track and report on at top level management. The further down the organisation you go, some of the more granular KPIs are likely to be ideally for middle or junior level management and of course for staff on the ‘shop floor’.
The list below is not intended to be comprehensive; this is provided purely to help with the process of selecting those KPIs that are most relevant to your unique circumstances.
Definition: The difference between budgeted and actual financial performance.
Importance: Monitoring budget variance helps identify areas where the company is overspending or underspending, allowing for timely adjustments.
Definition: The accuracy of financial forecasts compared to actual performance.
Importance: High forecast accuracy ensures reliable financial planning and better decision-making.
Definition: The ratio of current assets to current liabilities.
Importance: A healthy working capital ratio indicates good short-term financial health and liquidity.
Definition: The rate at which the company collects its accounts receivable.
Importance: High turnover rates suggest efficient credit management and cash flow.
Definition: The rate at which the company pays its suppliers.
Importance: High turnover rates indicate timely payment practices and good supplier relationships.
Definition: The ratio of a company’s total debt to its shareholder equity.
Importance: A balanced debt to equity ratio indicates financial stability and prudent use of leverage.
Definition: The time it takes for a company to convert its investments in inventory and other resources into cash flows from sales.
Importance: A shorter cash conversion cycle improves liquidity and operational efficiency.
Definition: The effectiveness of controlling and reducing business expenses.
Importance: Efficient expense management enhances profitability and operational sustainability.
Definition: The financial return on investments made by the company.
Importance: High ROI reflects successful investment strategies and effective capital allocation.
Definition: The speed and efficiency with which financial reports are prepared and disseminated.
Importance: Timely financial reporting ensures accurate and up-to-date information for decision-making.