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Looking for some financial KPIs and metrics?
Financial KPIs help CFOs and financial teams assess their company’s financial health and tell the story behind the company’s performance. However, every business manager should be able to read the financial signals and unlock strategic insights to identify opportunities for improvements that can affect the bottom line.
This awareness gives you an opportunity to strengthen your strategic role in the business and surface insights that will drive business performance.
But which metrics should you be focusing on? And most importantly, how should you track them to support data-driven decision-making at any given time?
In this article, we share key financial KPIs that every business manager should know, as well as how to track them through real-time dashboards and KPI reports.
What Are Financial KPIs?
Financial KPIs are a set of measurable values used by organizations and finance teams to measure and track their progress on specific business objectives. Monitoring these KPIs shows whether a business is achieving its financial goals.
We've decided to kick things off with some of the most important examples of KPIs for running your business.
Those that relate to your financial performance. Whether you're a member of a finance team or not, these financial key performance indicators are critical to measure and understand the success of your business operations.
Financial KPI Examples
Financial KPIs For Understanding Your Profitability
These examples of KPIs are for helping you understand how well your business is performing in terms of profitability. This can help you benchmark both internally and externally as well as help you set growth targets over time.
Gross Profit Margin
Expresses your profits as a percentage of total sales revenues generated after subtracting the cost of goods sold (COGS). It gives you a high-level view of how much profit you're making.
The gross profit margin doesn't factor in all expenses and shouldn't be used for detailed decision-making. However, it’s useful for bench-marking your performance over time or comparing your profitability to another similar company.
Net Profit Margin (NPM)
NPM is the percentage of revenue remaining after operating expenses, interest, and taxes have been deducted from total revenue. It gives a more accurate understanding of profit at your company, but is less useful for making comparisons with other companies.
Financial KPIs: Monthly Recurring Revenue (MRR)
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. For example, any customer who signs up for a recurring monthly subscription to Cascade increases our MRR.
Return on Equity (ROE)
Measures your net income against each unit of shareholder equity. In other words, ROE measures the amount of profit a company generates for each dollar of shareholder equity invested. Return on equity ratio not only provides a measure of your organization’s profitability but also its efficiency. It’s an important KPI because it provides investors with insight into how efficiently a company is using its equity to generate profits.
Financial KPIs For Understanding Your Liquidity
Being profitable is key, but if you're not able to pay your debts or stay liquid, you won't be around for long. These examples of finance KPIs will help do that.
Current Ratio
Current Ratio weighs your assets, such as accounts receivables, against your current liabilities, including accounts payable. The KPI is used to help you understand the solvency of your business.
Current Ratio formula = Current Assets / Current Liabilities
Quick Ratio
The quick ratio, also known as the acid test ratio, is a financial KPI that measures a company's ability to pay its short-term obligations using only its most liquid assets such as cash, marketable securities, and accounts receivable. The quick ratio is calculated by dividing the sum of a company's quick assets by its current liabilities.
This KPI is essential for companies that operate in industries with volatile cash flows or cyclical demand patterns, as it can help them evaluate their ability to weather unexpected disruptions or delays in cash receipts.
Debt-To-Equity Ratio
The debt-to-equity ratio measures a company's level of financial leverage and risk. A higher debt-to-equity ratio indicates that a company has more debt than equity, which increases its financial risk. On the other hand, a low debt-to-equity ratio indicates that a company has a strong balance sheet and a better ability to weather financial shocks.
Investors, lenders, and management use this KPI to evaluate a company's creditworthiness and financial stability.
Accounts Receivable Turnover
Accounts receivable turnover shows how well you collect what is owed to you by your customers. To calculate the KPI, take total earnings for a given period and divide them by average accounts receivable.
Monitoring this over time allows you to detect problems early. It will help you identify customers starting to take longer and longer to pay. You’ll soon see an impact on your own liquidity if this happens.
Runway and Burn Rate
The two KPIs work together to give you an idea of how much time you have for survival if sales were to cease completely in the worst-case scenario.
Divide the total amount of cash you have available by how much you spend each month—this is your burn rate.
Runway will tell you how much time you have before your company runs out of money. To calculate it, divide your total available cash by your burn rate.
Working Capital
Working capital measures a company's ability to meet its short-term obligations and manage its cash flow effectively. If a company's working capital is positive, it has enough liquid assets to meet its short-term liabilities. Having this information can help companies avoid financial distress such as missed payments, defaults, or bankruptcy.
Financial KPIs For Understanding Your Efficiency
If you're profitable and liquid, you've already passed some of the hardest tests in the business. Now is the time to optimize the efficiency of your business operations and look for opportunities to improve, which in turn will increase profitability and stability.
Revenue Per Employee
Employee costs usually make up the bulk of a company's expenses. Therefore, it's often useful to measure how much revenue you are actually generating for each employee in your company.
You can then determine whether you're making an appropriate amount of revenue based on your business size.
Revenue Per Customer
This gives you an idea of how much gross revenue you make per customer. The method you use to calculate it will vary depending on your business.
As a SaaS business, we consider Life Time Value (LTV) based on what customers pay for their subscription and how long a subscription typically lasts. Another example might be a telecom company that offers services such as cable TV, internet, and phone. The company can calculate its revenue per customer by dividing its total revenue from these services by the total number of customers who subscribe to one or more of these services.
Revenue Growth Rate
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.
A consistently high revenue growth rate can be a sign of a healthy and profitable company, while a declining revenue growth rate can indicate issues with the company's operations, competition, or market conditions.
Cash Conversion Cycle
Measures the time it takes to convert an investment in inventory or some other resource input into cash. 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.
Total Asset Turnover
The total asset turnover of a company shows how efficiently it uses its assets to generate revenue. In other words, the metric measures how much revenue a company generates for every dollar it owns.
When a company has a high asset turnover ratio, it can generate more profits and grow faster than its competitors with similar asset bases. Companies with a low asset turnover ratio may be underutilizing their assets and may need to optimize their operations or divest inefficient assets.
As an example, a ratio of .5 means that every dollar of assets generates 50 cents of sales.
Operating Cash Flow
Operating cash flow is an important financial KPI for businesses because it measures how well they generate cash from their core operations.
With a strong operating cash flow, a company can invest in growth opportunities, repay debt, or return value to shareholders. In contrast, a company with negative operating cash flow may take steps to stay afloat by cutting costs, raising prices, or seeking external financing.
How To Track Financial KPIs With Cascade?
Cascade is the ultimate strategy execution platform that empowers businesses to execute their strategies flawlessly. Our powerful tool comes with a range of features, including extensive KPI dashboards, real-time data integration, and analytics capabilities.
Whether you’re an executive manager, CFO, or head of operations, Cascade provides the tools you need to make data-driven decisions and achieve your financial goals.
👉Here’s how you can track KPIs in Cascade:
1. Get your free financial strategy plan template
Sign up for Cascade and access your free template. The template will help you define your financial goals, objectives, and KPIs to measure success.
Here’s a preview of your template:
✨More related templates:
- Financial Risk Management Plan Template
- Sales Plan Template
- Business Development Strategy Template
- Business Acquisition Strategy Template
- Investment Strategy Template
- Strategic Cost Reduction Plan Template
2. Customize your data
While the Cascade template comes pre-filled with examples, you have the power to customize your data and financial metrics to ensure they are relevant to your specific business needs.
3. Integrate Cascade with your data sources
With Cascade, you have two options to track your KPIs: manually and automatically.
The latter option is far more efficient, as it simplifies data collection and ensures you're working with accurate and up-to-date data.
By integrating Cascade with your favorite business tools, such as Excel, Google Sheets, or Power BI, you can easily import your KPI data and keep your team in the loop.
No more worrying about manual data entry or inaccuracies—let Cascade take care of the hard work for you.
4. Bring in your team
Send an invite to your team members to collaborate on shared KPIs and ensure everyone is on the same page.
With Cascade, you can assign roles and responsibilities, set up notifications, and communicate with your retail teams in one place.
5. Start tracking performance with dashboards and reports
Cascade's powerful dashboards provide real-time visibility into your KPIs and allow you to quickly identify areas that need attention.
With customizable widgets and drag-and-drop features, you can easily visualize and analyze key metrics to improve financial performance and operational efficiency.
Need to explain the “why” behind your financial KPIs?
Using Cascade's strategy reports, you can choose a set of data and add context to it. By providing this context, your stakeholders will be able to make informed and data-driven decisions.
You can customize the reports to fit your specific needs and drill down into the underlying reasons behind your financial performance.
📚 Recommended read: How To Track KPIs To Hit Your Business Goals
Get Real-Time Visibility Into Your Financial Health With Cascade 🚀
Manually tracking all of the financial KPIs spread across multiple business tools is time-consuming, tedious, and leaves a ton of room for error. The lack of real-time visibility into your financial health and the highly competitive nature of your business environment can quickly lead you to lag behind.
Cascade offers powerful reporting tools that make it easy to take total control of your financial reporting by doing the calculations and visualizations for you.
By centralizing your financial data in one place that updates in real-time, you’ll always have an accurate picture of your business’s financial performance.
Automating your financial reporting with Cascade will help you focus more time and energy on strategic work that will move your business forward.
Ready to take it for a spin? Start today with a free forever plan or book a 1:1 product tour with Cascade’s in-house strategy expert.
Editor’s note: We've been compiling a whole bunch of KPI examples as part of our KPI examples mini-series. This post is a small supplement to that series, which provides 12 of the most common financial KPIs, and also includes a brief description of why you may want to use each.
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