CFO’s duties in today’s volatile market conditions are critical. Innovative financial management solutions enable CFO’s to make strategic financial decisions smarter by analyzing the real-time KPI’s via built-in dashboards. The CFO’s key responsibilities as such budgeting & forecasting, economic strategy, treasury & controllership together form a strong corporate financial strategy. Monitoring key performance indicators in real-time facilitates CFO’s to predict risks like economic downturns, pandemics and forecast capital budgeting required to meet the organizational goals for every financial year.
Many organizations’ CFO’s could not invest in affording costly technologies, systems, and tools for budgeting & forecasting, monitoring financial transactions in real-time to take control over cash flow and capital management.
Our financial experts of Park Intelli Solutions collectively share the 32 financial KPI’s every CFO must keep track for accurate predictions and strategic corporate budgeting.
Every CFO Must Measure The 33 Crucial Financial KPI’s to Empower Corporate Strategic Decisions
Operating Cash Flow
Operating cash flow is the revenue generated by any business after deducting the operational costs. OCF is an important financial KPI used to predict the cash flow required for investments and expenses of your business operations. Compare the operating cash flow against total capital spent to evaluate if the cash flow is positive from your business functions.
Current Ratio
Current Ratio is a financial KPI that helps to measure the company’s short-term liquidity. It defines an organization’s ability to fulfil all company’s financial obligations as such vendor payments, account receivables and current liabilities in one year. It is an investor indicator that is used to assess a healthy operating cycle of any business.
Quick Ratio/Acid Test
Quick ratio or acid test is the precise measure of a company’s financial health to evaluate organizations short-term assets to cover its interim liabilities excluding the inventories & prepaid expenses.
Burn Rate
The burn rate is a financial KPI used to denote the investors and CFO’s whether the company’s operating costs are sustainable in the long run. It is a measure of cash utilization rate on daily, weekly, monthly, quarterly & annually basis from its cash reserves to generate operating profit for the respective period. It also indicates the average time period required to generate the cash reserves that are projected to spend with operating profit in a due time.
Net Profit Margin
The financial KPI used to measure profitability is called Net Profit Margin. It indicates the percentage of revenue generated as profit through the business, after deducting all operating costs incurred from the overall revenue generated by the company.
Gross Profit Margin
It is one of the critical KPI’s that indicates financial health of the company is Gross profit Margin. It is a measure percentage of revenue generated against the cost of the goods sold after deducting from net sales. The higher the gross profit percentage indicates the capability of the organization to manage operating costs and/or reinvest for innovation & growth.
Working Capital
It is a financial KPI used to measure a company’s liquid assets such as cash reserves, short-term investments & account receivables to meet its short-term liabilities. It is a measure of a company’s ability to make cash quickly for interim solvency.
Current Account Receivables
It is one of the critical financial KPI that measure the company’s outstanding cash reserves liable to receive as a result of services/products sold at credit for the client company as letter of credit or in the form of invoices with average due period of time to make payment. It is a measure of a company’s short-term liquidity factor to analyse its financial health. A high current account receivable indicates risks of loss for the company due to its inability to collect its receivables from long-term debtors.
Current Account Payables A financial KPI measures the overall liabilities of the business for a short-term to all its creditors such as vendors, banks and financial organizations or provisional investors. A high current account payable indicates the risks associated with the company to meet its interim liabilities with its available short-term assets. Account Payables Turnover It is financial KPI that measures the rate at which the company is paying its suppliers and debtors. A slow rate of account payable turnover indicates the company’s capability to repay debtors or decreased credit ratings, while a fast rate of account payable turnover indicates how quickly the company depletes its cash reserves for vendor payments. Manage your accounts payable turnover ratio with more control to keep your business credit score on the rise.
Also see: Finance and accounting, Outsourcing service
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