Financial KPIs - Key Performance Indicators

You can create financial KPIs by benchmarking functions of financial management.

Functions Of Financial Management

1. Financial Planning:

Management division has duty to plan finance for the purpose of ensuring adequate funds and meet the needs of the business.

In the short term, funds means that amount of money is required to pay employers or to invest in stocks. In the middle and long term, the funds are required to add the productive capacity of the business.

2. Financial Control:

Thanks to this the company is ensured that the stated goals are being met. In addition, this helps the company makes decision in how much to invest in the short term and how to raise the required funds.

3. Financial Decision Making:

There are three factors prioritized financial decision making are investment, financing and dividends. Investment is the first factor that must be financed in some way for which various alternatives are available. 

Second, a financing is decided to retain returns or should it should be allocated among shareholders via dividends.

KPI examples of Financial dept

1. Monitor financial performance

• Generate total sales

• Revenue by major customer

• Sales generated by department / team

• Sales per employee hour

• Total gross profit margin

• Gross margin for each product line

• Gross profit % by department / team

• Benefits cost per employee

• Sales growth rate

• Sales per customer and shrink (loss due to theft and breakage)

2. Monitor financial costs

• Cost of goods sold

• Receivables turnover ratio

• Total receivables

• Payables turnover ratio

• Total payables

• Budget variance

• Budgeted expenses

• Actual expenses

• Inventory turnover

• Inventory value

3. Measure returns on investment

• Gross profit

• Skills

• SER

• Order processing cost

• Capacity utilization

• Return on capital

• New product development rate

• Customer lifetime value

• IT cost by sales

• Contingency %

• Customer satisfaction

• Annual Equivalent Rate (AER)

• Productivity

• Average delivery cost

• Growth against market

4. Procurement and supplier management

• Accounts payable days

• Bought in materials and services (value of materials consumed + value of supplies consumed)

• Purchasing department’s administration costs as % of sales

5. Monitor site health & safety costs and suggest any improvements that could be made

• Health & safety cost reports produced – weekly / monthly

• Increase number of initiatives to optimize health & safety costs.

• Reduce costs of safety management

6. Monitor HR costs

• Total HR revenue

• Total headcount

• Revenue factor (total HR revenue by total headcount)

• Total overtime cost

• Overtime headcount factor (for total employees)

• Total eligible headcount

• Total labor cost

• Overtime labor cost ratio

• Labor cost competitiveness (comparability in the industry of lowest possible labor cost)

• HR related total operating expenditure

• HR related operating cost (total labor cost by total headcount)

• HR controllable cost

• HR related operating cost (HR controllable cost by labor cost)

• HR related operating cost (HR controllable cost by headcount)

7. Financial management – Manufacturing

• Gross profit %

• Return on capital employed %

• Interest cover

• Annual Equivalent Rate (AER) %

• SER %

• Debtor length (days)

• Creditor length (days)

• Stock turn/year

• Current ratio

• Ratio of cash flow by capital expenditure)

• Working capital requirement

• Z-score

• Tax charge %

• Cost of finance %

8. Work centre load of all operations – Manufacturing

• Employee work center loading

• Employee scheduled time

• Employee available time

• Machine work center loading

• Machine scheduled time

• Machine available time

Steps to create KPIs of Financial dept

• Setting up job purpose of Financial department.

• Setting up key responsibilities/key KRAs of this department.

• Setting up elements that how to measure each KRA.

• Setting up KPI of each KRA.

• Summarize all KPIs of each department.

KPIs of each position of Financial field

• Financial accountant

• Financial administrative assistant

• Financial analyst

• Financial assistant

• Financial auditor

• Financial controller

• Financial consultant

• Financial clerk

• Financial director

• Financial manager

• Financial management analyst

• Financial planner

• Financial reporting manager

• Financial specialist

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