21 CFO KPIs To Build Your Dream Metric Dashboard
Modern CFOs are charged with more than simply reporting on previous financial performance.
They’re involved in formulating the strategic direction of the company, and are asked to control all aspects of performance toward those financial goals.
That means that to be an effective Chief Financial Officer in today’s environment, you need a strong grasp of the metrics that define current performance.
The last thing you want is for your CEO to hit you with a question you’re not prepared for.
The best way to have all the answers at your fingertips is by building a metric dashboard—a centralized reporting suite with all of your important KPIs on display and up-to-date data.
In this guide, we’ll explore 21 of the most important CFO KPIs to include in your dashboard, so you can choose the ones that make sense for your organization (you might not need to track all of them).
These five operational KPIs measure the efficiency of your current processes and give you insight into your current financial situation (like how much cash you have available).
1. Operating Cash Flow
Operating cash flow is the amount of cash your business generates through normal daily operations.
It helps you understand whether the cash flow you’re generating can service your operational and growth goals, or whether you’ll need to obtain funding to continue functioning.
2. Working Capital
Working capital is the amount of capital (cash) you have immediately available for use in growth initiatives such as expansion or short-term hiring.
It’s basically a measure of “cash in the bank” and is best used in conjunction with the operating cash flow KPI when making decisions about future investments.
3. Budget Variance
Budget variance occurs when there is a difference between your budgeted figures and your actuals.
This can be positive or negative, depending on whether your revenue or expenses varied, and whether the difference was above or below your budget.
The budget variance KPI helps you measure how often this occurs.
While budget variance is normal, you want it to happen as seldom as possible, as more accurate budgets lead to more efficient spending and more accurate financial projections.
4. Payment Error Rate
Your payment error rate measures the percentage of payments (whether from debtors or to creditors) that didn’t go through due to processing errors.
The reason for the error could be human-made or system-based, but in any case, you want to avoid payment errors as they often incur additional charges.
5. Days to Close
The days to close KPI measures how long it takes your finance team to close the books and create financial reports at the end of the month or year.
It’s a metric that helps track the efficiency of your team and internal processes.
6. Cash Conversion Cycle
Cash conversion cycle tells you how long it takes to turn your goods into cash.
It takes into account your outstanding inventory and sales. It’s also a measure of efficiency. A shorter cash conversion cycle indicates you’re able to generate revenue quickly and not sitting on inventory for too long.
Financial Efficiency KPIs
Financial efficiency KPIs describe how well your company is using its capital to grow and generate new revenue.
7. Burn Rate
Burn rate is the speed at which your company is spending its capital.
It’s a KPI often used by companies that aren’t yet profitable, and are relying on VC or angel investments to keep their company growing.
8. Cash Runway
Cash runway uses the amount of cash you’re “burning” each week to help project how long you’ll be able to operate without an additional cash investment.
This can allow you to make decisions like pursuing a new funding round or debt engagement.
9. Magic Number
For SaaS companies, the magic number KPI measures revenue growth compared to sales and marketing spend.
It essentially represents your ROI on sales and marketing expenditure.
10. Burn Multiple
Burn multiple is a bottom-up measurement of how effectively your company is using its cash investments.
It’s calculated as such:
Burn Multiple = Net Burn / Net New ARR
This means that your burn multiple tells you how much cash you spend to generate one dollar in revenue.
Ideally, this would be less than 1x, which means you generate more revenue than dollars spent (meaning you’re profitable). However, this isn’t the case for many early-stage companies, so the idea is simply to keep burn multiple as low as possible.
These six liability KPIs measure financial stability as it relates to company debt and accounts payable.
Your debt-to-equity ratio measures how your company is funding its growth.
If you have a high debt-to-equity ratio, it means your growth is driven by debt rather than owner’s equity in the company.
12. Current Ratio
Your current ratio is your current assets divided by your current liabilities.
It’s a measure of your company’s ability to pay down liabilities using its available assets in the short to mid-term.
13. Quick Ratio
Quick ratio is similar to the current ratio except that it focuses on your most liquid assets. Its essentially an acid test that describes your company’s ability to quickly pay off current liabilities.
The formula for calculating your quick ratio is:
(Cash + Marketable Securities + Accounts Receivable) / Current Liabilities
14. Interest Coverage Ratio
Your interest coverage ratio is your earnings before interest and tax divided by your interest expense.
It’s used to measure your company’s debt levels as well as profitability. Lenders use this KPI to assess their level of risk with a loan: a high interest coverage ratio is a lower risk loan, as it shows that your company has minimal issues covering interest expenses.
15. Accounts Payable Turnover
The accounts payable turnover metric tells you how long it takes, on average, to pay your creditors.
If this time period is getting longer, it can be a sign of a cash flow issue (as you’re waiting on cash to pay off debts).
Revenue and Earnings KPIs
Our last six KPIs for CFOs are focused on revenue and earnings. They explore your company’s ability to generate revenue, receive payment for sales, and create earnings for shareholders.
16. Gross Profit Margin
Your gross profit margin is an expression of financial health from the perspective of sales.
Where net profit margin takes into account all expenses like rent and utilities, gross profit margin looks only at the revenue you generate minus direct expenses like the cost of manufacturing components.
17. Earnings per Share
This metric helps shareholders understand how profitable the company is by looking at how much money is earned per share.
It’s an objective KPI that can be used to compare companies against each other regardless of industry, vertical, or stage.
18. Compound Average Growth Rate
Compound average growth rate is a metric that describes how much compound growth, either positive or negative, your company has generated over a specific period.
It’s generally measured on a quarterly and annual basis.
19. EBITDA & EBITDA Growth
EBITDA (earnings before interest, tax, depreciation, and amortization) is similar to net income, but it removes accounting biases that might throw the number off.
It’s basically a measure of your company’s profitability, with strong EBITDA growth being a good signal of financial health.
20. Accounts Receivable Turnover
Accounts receivable turnover describes the amount of time it takes, on average, for your debtors to pay you.
A shorter accounts receivable turnover is desirable, and means that your AR team is efficient at chasing up on invoices and getting payments through.
21. Return on Equity
This CFO KPI is important to investors and business owners, as it tells them how well their money is being used to create profits.
It’s essentially an ROI measurement that describes how much profit your company generates per dollar of equity invested.
How To Decide Which KPIs To Track
Today, it’s easier than ever to track financial KPIs like the 21 we’ve discussed above.
Any CFO with a financial reporting platform can build a custom dashboard and track as many metrics as they like, from high-level KPIs like gross profit margin right down to operational metrics like days to close.
But here’s the thing: you don’t have to track everything.
In fact, you probably shouldn’t track every single metric, at least not at once. Trying to stay on top of too many CFO KPIs is just going to cause analysis paralysis and reduce your focus.
The idea should be to choose the KPIs that are most relevant to your business situation and goals, and focus specifically on driving progress toward those.
Use the 21 metrics we’ve discussed above as a starting point. You can quickly eliminate some of them based on your company type, age, and stage.
For instance, if your company is bootstrapped or already profitable, you may not need to track funding-based KPIs like burn rate.
Similarly, earnings per share might be a redundant metric if you’re a super early-stage company without any shareholders other than a founder.
From there its all about priorities.
If rapid growth is a priority, then you should focus more on metrics like gross profit margin, working capital, and operating cash flow.
If, on the other hand, you’re more focused on improving finance processes and procedures, then you might prioritize KPIs like days to close and budget variance.
Maximze Financial Performance With These CFO KPIs
Whichever CFO KPIs you deem most relevant to your organization and decide to track, you should set up a system that gives you instant insight into progress. The last thing you want to do is have to wade through spreadsheets and various tabs to extract the data you’re looking for.
A good financial planning and analysis tool will allow you to integrate all of your other financial tools, then build a custom dashboard to track the metrics you want to keep tabs on.
Learn how to choose the best platform for your needs in our guide: What Are The Best Financial Modeling Tools?
This content is presented “as is,” and is not intended to provide tax, legal or financial advice. Please consult your advisor with any questions.