60+ Finance KPI Examples
The financial health of a company is like its pulse. It's an indicator of its overall well-being, future sustainability, and growth potential. As businesses evolve, the metrics they use to gauge their financial position must too. That's where Key Performance Indicators (KPIs) come into play, providing actionable insights into the intricacies of a company's financial performance.
Understanding KPIs
Key Performance Indicators are quantifiable metrics that businesses use to evaluate how effectively they're achieving their key business objectives. In a world fueled by data, KPIs are the compass that guides decision-making, setting the strategic direction, and illuminating the path to success. While metrics provide raw data points, KPIs are those metrics that align with business goals, making them indispensable in the quest for success.
The Importance of Finance KPIs
Diving deeper into the realm of KPIs, financial KPIs hold a pivotal spot. They provide a panoramic view of a company's financial health. Whether it's liquidity, profitability, operational efficiency, or debt management, financial KPIs capture it all. Moreover, in an unpredictable business environment, they serve as an early warning system, flagging potential issues before they escalate into insurmountable problems.
Understanding financial KPIs isn't just for the CFO or the finance team. In a modern enterprise, everyone from marketing to operations should have a grasp of these metrics. It ensures alignment, promotes cross-functional collaboration, and encourages a more holistic approach to problem-solving.
Choosing the Right KPIs for Your Finance Goals
Every business is unique, shaped by its goals, challenges, industry norms, and market dynamics. Therefore, there isn't a one-size-fits-all set of financial KPIs. However, several factors can guide you in selecting the most pertinent ones:
- Alignment with Business Objectives: The KPIs chosen should directly correlate with the company's overarching goals.
- Actionability: It's essential to select KPIs that provide actionable insights. A KPI that doesn't prompt decision-making or influence strategy is just a number.
- Relevance: The business landscape is dynamic. Hence, KPIs that were relevant yesterday might not hold significance today. It's crucial to revisit and revise them periodically.
On KPI Examples, the community plays an active role in identifying the most relevant KPIs. Users highlight the KPIs they find most valuable by upvoting them, creating a constantly evolving list that's shaped by real-world applicability and significance.
Most Popular Finance KPIs for 2024
Discover the finance KPIs that users have upvoted the most. Dive into each one to learn how they're calculated.
Net Revenue Growth Rate %
Measures the percentage increase in net revenue from one period to the next. This KPI is crucial for understanding the company's financial health and operational efficiency. High revenue growth can indicate a successful product or service and suggest that a company is outperforming its competitors.
Formula
[(Current Period Revenue - Previous Period Revenue) / Previous Period Revenue] * 100
Example
If a company's revenue was $1,000,000 last year and $1,200,000 this year, the revenue growth rate is 20%. This means that the company's revenue has grown by 20% over the past year.
Deferred Revenue 💰
Revenue received by a company for goods or services that haven't been provided yet. It indicates future obligations and gives insights into the company's cash flow and future revenue recognition.
Formula
Payments received in advance - recognized revenue
Example
If a software company collects a yearly subscription fee of $1200 upfront but has delivered only one month of service, the deferred revenue is $1100
Gross Profit Margin %
A financial metric that shows a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). A high gross profit margin indicates that a company can make a reasonable profit on sales, as long as it keeps overhead costs in control.
Formula
(Gross Profit / Total Revenue) * 100
Example
If a company's gross profit is $400,000 and its revenue is $1,000,000, the gross profit margin is 40%. This means the company retains 40% of its total revenue after accounting for the direct costs associated with producing the goods it sells.
Earnings Before Interest and Taxes (EBIT) 💰
A company's net income before interest and income tax expenses are considered. EBIT provides a clear picture of a company's operational profitability, excluding the impact of finance and tax strategies.
Formula
Net Income + Interest + Taxes
Example
If a company's net income is $500,000, with interest expenses of $50,000 and tax expenses of $100,000, the EBIT is $650,000.
Recurring Revenue 💰
Recurring Revenue is a measure of the predictable and recurring revenue components of your subscription business. It's an important KPI for subscription-based companies like software-as-a-service (SaaS) providers as it provides a clear picture of revenue patterns and growth. Typically measured as Monthly Recurring Revenue (MRR) or Annual Recurring Revenue (ARR). Allows businesses to track and predict future revenue, which is essential for budgeting, forecasting, and business planning.
Formula
Sum of all periodic payments from subscribers or contracts
Example
If a SaaS company has 500 customers paying $100 per month and 100 customers paying $1,000 annually, the ARR is 500 x $100 x 12 + 100 x $1,000 = $700,000; the MRR is ARR divided by 12 months ($59,167).
Comprehensive List of Finance KPIs
Below is an extensive list of finance KPIs, each accompanied by a brief summary. Click on any KPI to delve into its detailed description, including the formula and examples.
Accounting
- Audit Completion Time: The time taken to complete a financial audit, in days.
- Frequency of Financial Reporting: How often financial reports are generated and distributed (monthly or quarterly).
- Internal Control Effectiveness Rate: The percentage of internal financial controls (checks and processes) that are effectively functioning as intended.
- Number of Financial Discrepancies Detected: The number of discrepancies or errors found in financial records during a specific period.
- Ratio of Accurate Financial Statements: The percentage of financial statements deemed accurate after an internal review or audit.
Budget & Expense Management
- Budget Variance: The difference between the budgeted amount for any category and the actual amount spent.
- R&D Investment Ratio: Measures the proportion of revenue that a company invests in research and development (R&D) activities.
- Software Development Cost Variance: The difference between the budgeted cost for software development and the actual cost incurred.
- Total Reimbursed Expenses: The total amount reimbursed to employees for business-related expenses.
Customer & Market Economics
- Average Revenue Per Customer: Average Revenue Per Customer (ARPC), also known as Average Revenue Per User (ARPU) in some contexts, is a measure of the revenue generated per user or unit of customer, usually calculated over a specific time period (such as monthly or annually).
- Customer Acquisition Cost: The cost associated with acquiring a new customer.
- Customer Acquisition Cost Payback Period: Time it takes to earn back the Customer Acquisition Cost (CAC) through customer spending.
- Customer Lifetime Value: Customer Lifetime Value (CLV) is a prediction of the total value of a customer to your business over the entirety of their relationship with you.
- Customer Profitability Score: Identifies and quantifies the profitability of individual customers.
Employee & Payroll
- Average Employee Salary: The mean salary paid to employees.
- Benefits as a Percentage of Salary: The proportion of total benefits expense to the total salary expense.
- Overtime Pay as a Percentage of Total Pay: Measures the proportion of total payroll that is spent on overtime.
- Payroll to Revenue Ratio: Showcases the proportion of a company's revenue spent on total payroll.
- Total Payroll Taxes: The sum of all payroll taxes paid by the organization.
Financial Statements
- Deferred Revenue: Revenue received by a company for goods or services that haven't been provided yet.
- Earnings Before Interest and Taxes (EBIT): A company's net income before interest and income tax expenses are considered.
- Gross Profit Margin: A financial metric that shows a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS).
- Net Profit: The amount of money the company retains after all its expenses, including financial costs and taxes, have been paid.
- Operating Cash Flow: The cash generated from regular business operations.
- Recurring Revenue: Recurring Revenue is a measure of the predictable and recurring revenue components of your subscription business.
- Total Assets: The total amount of assets, both current and long-term, that a company possesses.
- Total Liabilities: The total amount of debts and obligations owed by the company.
Liquidity & Solvency
- Acid Test (Quick Ratio): Evaluates a company's short-term liquidity, discounting inventory.
- Burn Rate: The rate at which a company is spending its capital, especially important for startups or growth-focused companies.
- Current Ratio: Measures a company's ability to pay off its short-term liabilities with short-term assets.
- Debt-to-Equity Ratio: Compares a company's total debt to its total equity, giving insights into its financial leverage.
- Working Capital: The difference between a company's current assets and current liabilities.
Operational Costs
- Cost of Goods Sold (COGS): The total cost directly associated with the production and upkeep of the product or services sold by a company.
- Infrastructure Costs: The total expenditure related to maintaining and upgrading the physical and digital infrastructure of a company.
- Legal Fees and Settlements: The total costs related to legal consultations, proceedings, and settlements.
- License and Royalty Costs: The total amount paid for licenses (e.
- Marketing and Advertising Expenditure: The overall costs associated with promoting products or services.
- Total HR-related Expenses: The cumulative costs associated with recruiting, salaries, benefits, training, and other HR activities.
- Utility and Rent Expenses: The total expenditure for utilities (like water, electricity) and renting or leasing physical spaces.
Receivables & Payables
- Accounts Payable Turnover: How often a company pays off its suppliers relative to the amount of credit extended, often annually.
- Aging Accounts Receivable: A report or schedule detailing the lengths of time that invoices have been outstanding, in days.
- Average Payment Cycle Time: The average time it takes for the company to process and pay an invoice upon its receipt, in days.
- Bad Debt to Sales Ratio: This metric gives the percentage of sales that have been written off as uncollectible.
- Collections Effectiveness Index: Evaluates the effectiveness of a company's collections efforts over a specific period.
- Days Payable Outstanding: Represents the average number of days it takes a company to pay its invoices from trade creditors, such as suppliers.
- Days Sales Outstanding: Measures the average number of days it takes a company to collect payment after a sale has been made.
- Operational Cost Per Collection: Determines the cost associated with each collection effort.
- Percentage of On-Time Payments: The percentage of all payments made on or before their due date.
- Ratio of Invoices Disputed: The percentage of total invoices that have been disputed by the company.
- Total Outstanding Payable Amount: The total amount that the company owes to its suppliers at a specific point in time.
Revenue & Profit
- Customer Churn Rate: Measures the percentage of customers or subscribers who stop using a company's product or service during a particular time period.
- Customer Expansion Rate: Measures the rate at which existing customers expand their contracts or purchases.
- Customer Retention Cost: Represents the total cost of activities and efforts aimed at retaining existing customers.
- Earnings Per Share: Represents the portion of a company's profit allocated to each outstanding share of common stock.
- Net Revenue Growth Rate: Measures the percentage increase in net revenue from one period to the next.
- Operating Profit Margin: Shows the profitability of standard business activities, excluding any extraordinary items or tax.
Shareholder & Creditor Relations
- Debt Service Coverage Ratio: Measures a company's ability to service its current debts with its current cash flow.
- Dividend Payout Ratio: Assesses the proportion of net income paid out to shareholders in the form of dividends.
- Equity Turnover: Evaluates a company's efficiency in using shareholders' equity to generate sales.
- Return on Equity: Measures how much profit a company generates relative to shareholders' equity.
- Times Interest Earned Ratio: Measures a company's ability to meet its interest obligations from operations.
Taxes
- Effective Tax Rate: Represents the average rate at which a corporation or individual is taxed on their pre-tax income.
- Tax Audit Pass Rate: Measures the percentage of tax audits passed without additional liabilities or penalties.
- Tax Savings Rate: Represents the percentage of potential taxes saved due to deductions, credits, or other tax strategies.
- Total Tax Paid: The total amount of taxes paid during a specific period.
Endnote
In today's data-driven world, navigating the sea of numbers and metrics can be overwhelming. But with the right set of financial KPIs, businesses can effectively chart their course, making informed decisions that drive growth and sustainability. As 2024 unfolds, let these KPIs be the guiding stars for your business, shining light on opportunities and steering you clear of potential pitfalls.
Looking to delve into other areas of your business? Check out our extensive range of different categories where you will find KPIs and let data drive your success.