30 Financial KPIs to Track Now (2024)

Financial key performance indicators (KPIs) are select metrics that help managers andfinancial specialists analyze the business and measure progress toward strategic goals. Awide variety of financial KPIs are used by different businesses to help monitor theirsuccess and drive growth. For each company, it’s essential to identify KPIs that arethemost meaningful to its business.

The following overview of 30 KPIs is designed to help leaders choose the KPIs that make themost sense for their organizations in the year ahead.

What Are KPIs?

KPIs are metrics that provide insights into the underlying financial and operational strengthof a business. They can be based on any kind of data that is important to a company, such assales per square foot of retail space, click-through rate for web ads or accounts closed persalesperson. Many KPIs are ratios that highlight important relationships in data, such asthe ratio of profit to revenue or the ratio of current assets to current liabilities. Asingle KPI measurement can provide a useful snapshot of the business’s health at aspecificpoint in time.

KPIs are even more powerful when they are used to analyze trends over time, to measureprogress against targets or to compare the business with other, similar companies. Theirvalue expands further when businesses consider them alongside other meaningful KPIs tocreate a more complete view of the business.

What Is a Financial KPI?

Financial KPIs are high-level measures of profits, revenue, expenses or other financialoutcomes that specifically focus on relationships derived from accounting data — andthey’realmost always tied to a specific financial value or ratio. Most KPIs fall into five broadcategories based on the type of information they measure:

1. Profitability KPIs, such as gross profit margin and net profit margin.
2. Liquidity KPIs, such as current ratio and quick ratio.
3. Efficiency KPIs, such as inventory turnover and accounts receivableturnover.
4. Valuation KPIs, such as earnings per share and price to earnings ratio.
5. Leverage KPIs, such as debt to equity and return on equity.

Why Are Financial Metrics and KPIs Important to Your Business?

Like the indicators and warning lights displayed on a vehicle’s dashboard, financialKPIsenable business leaders to focus on the big picture, helping them steer the company andidentify any pressing issues without getting mired in the details of what goes on under thehood. These snippets of information can show when operations are running smoothly and whenthere are significant changes or warning signs. KPIs can also be used to help manage thecompany to achieve specific goals.

Which KPIs Are Best?

For any business, the best KPIs help companies determine what they're doing well and wherethey need to improve. While the actual metrics will vary from company to company, automatedKPIs are the best way to track performance. After selecting a set of KPIs that matches yourbusiness priorities, you can generally automate their calculation and have them updated inreal time by integrating the company’s accounting and ERP systems. This ensures theKPIsreflect the current state of the business and are always calculated the same way.

Automating KPIs is important for companies of all sizes. It means small businesses can directmore of their resources to analyzing KPIs instead of expending effort — and money— tocreate them. Larger enterprises can also better manage voluminous data this way than byusing error-prone spreadsheets, and they can achieve better consistency across businessunits.

Defining the Right KPIs for Your Business

Determining the most useful and meaningful KPIs for your business can be challenging. TheKPIs you choose will depend on your company’s goals, business model and specificoperatingprocesses. Some KPIs are almost universally applicable, such as accounts receivable turnoverand the quick ratio. Other KPIs differ by industry. For example, manufacturers must monitorthe status of their inventory, while services businessesmight focus on measuring revenue per employee when evaluating efficiency.

30 Financial Metrics and KPIs to Measure Success in 2023

Measuring and constantly monitoring KPIs are best practices for running a successfulbusiness. The list below describes 30 of the most commonly used financial metrics andKPIs, and you can find formulas and more information on each below.

1. Gross Profit Margin:

   This is an intermediate — but critical — measure of the profitabilityand efficiencyof the company’s core business. It’s calculated as gross profit dividedby netsales, and is usually expressed as a percentage. Gross profit isnet sales minus cost of goods sold (COGS),which is the direct cost of producing the items sold. Calculating profit as apercentage of revenue makes it easier to analyze profitability trends over time andto compare profitability with other companies. The formula for calculating grossprofit margin is:

   Gross profit margin = (Net sales–COGS) / Net sales x 100%

2. Return on Sales (ROS)/Operating Margin:

   This metric looks at howmuch operating profit the company generates from each dollar of sales revenue. It iscalculated as operating income, or earnings before interest and taxes (EBIT),divided by net sales revenue. Operating incomeis the profit a company makes on sales revenue after deducting COGS and operatingexpenses. ROS is commonly used as a measure of how efficiently the companyturns revenue into profit. The formula for return on sales is:

   Return on sales = (Earnings beforeinterest and taxes / Net sales) x 100%

3. Net Profit Margin:

   This is a comprehensive measure of how muchprofit a company makes after accounting for all expenses. It’s calculated asnetincome divided by revenue. Net income is often regarded as the ultimate metric ofprofitability — the “bottom line” — because it’s theprofit remaining afterdeducting all operating and non-operating costs, including taxes. Net profit marginis usually expressed as a percentage. The formula for net profit margin is:

   Net profit margin = (Net income /Revenue) x 100%

4. Operating Cash Flow Ratio (OCF):

   This liquidity KPI ratio measures acompany’s ability to pay for short-term liabilities with cash generated fromitscore operations. It’s calculated by dividing operating cash flow by currentliabilities. OCF is the cash generated by a company’s operating activities,whilecurrent liabilities include accounts payable and other debts that are due within ayear. OCF uses information from a company’s statement of cash flows, ratherthan theincome statement or balance sheet, which removes the impact of non-cash operatingexpenses. The formula for operating cash flow is:

   Operating cash flow ratio =Operating cash flow / Current liabilities

5. Current Ratio:

   This shows a company’s short-term liquidity. It’s theratio of the company’s current assets to its current liabilities. Currentassets arethose that can be converted into cash within a year, including cash, accountsreceivable and inventory. Current liabilities include all liabilities due within ayear, including accounts payable. Generally, a current ratio below one may be awarning sign that the company doesn’t have enough convertible assets to meetit*short-term liabilities. The current ratio formula is:

   Current ratio = Current assets /Current liabilities

6. Working Capital:

   This liquidity measure is often used in conjunctionwith other liquidity metrics, such as the current ratio. Like the current ratio, itcompares the company’s current assets with its current liabilities. However,itexpresses the result in dollars instead of as a ratio. Low working capital mayindicate that the company will have difficulty meeting its financial obligations.Conversely, a very high amount may be a sign that it’s not using its assetsoptimally. The formula for working capital is:

   See Also

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   Working capital = Current assets–Current liabilities

7. Quick Ratio/Acid Test:

   The quick ratio is a liquidity risk KPI thatmeasures the ability of a company to meet its short-term obligations by convertingquick assets into cash. Quick assets are those current assets that can be convertedinto cash without discounting or writing down the value. In other words, quickassets are current assets – inventory. The quick ratio is also known as theacidtest ratio because it’s used to measure the financial strength of a business.Itreflects the organization’s ability to generate cash quickly to cover itsdebts ifit experiences cash flow problems. Companies often aim for a quick ratiothat’sgreater than one. The quick ratio formula is:

   Quick ratio = Quick assets /Current liabilities

8. Gross Burn Rate:

   Generally used as a KPI by loss-generatingstartups, burn rate measures the rate at which the company uses up its availablecash to cover operating expenses. The higher the burn rate, the faster the companywill run out of cash unless it can attract more funding or receives additionalfinancing. Investors often examine a company’s gross burn rate whenconsideringwhether to provide funding. The gross burn rate formula is:

   Gross burn rate = Company cash /Monthly operating expenses

9. Current Accounts Receivable (AR) Ratio:

   This metric reflects theextent to which the company’s customers pay invoices on time. It’scalculated as thetotal value of sales that are unpaid but still within the company’s billingterms inrelation to the total balance of all AR. A higher ratio is generally better becauseit reflects fewer past-due invoices. A low ratio shows the company is havingdifficulty collecting money from customers and can be an indicator of potentialfuture cash flow problems. The current AR formula is:

   Current accounts receivable =
   (Total accounts receivable – Past due accounts receivable) / Totalaccountsreceivable

10. Current Accounts Payable (AP) Ratio:

    This is a measure of whetherthe company pays its bills on time. It’s the total value of supplier paymentsthatare not yet due divided by the total balance of all AP. A higher ratio indicatesthat the company is paying more of its bills on time. Spreading out payments tosuppliers may ease a company’s cash flow problems, but it can also mean thatsuppliers are less likely to extend favorable credit terms in the future. Theformula for current AP is:

    Current accounts payable =
    (Total accounts payable – Past due accounts receivable) / Total accountsreceivable

11. Accounts Payable (AP) Turnover:

    This is a liquidity measure thatshows how fast a company pays its suppliers. It looks at how many times a companypays off its average AP balance in a period, typically a year. It’s a keyindicatorof how a company manages its cash flow. A higher ratio indicates that a company paysits bills faster. The formula for AP turnover is:

    Accounts payable turnover =
    NetCredit Purchases / Average accounts payable balance for period

12. Average Invoice Processing Cost:

    Average invoice processing cost isan efficiency metric that estimates the average cost of paying each bill owed tosuppliers. Processing costs often include labor, bank charges, systems, overhead andmailing costs. Factors such as outsourcing and the level of AP automation caninfluence the overall processing cost. A lower cost indicates a more efficient APprocess. The formula for AP process cost is:

    Average invoice processing cost =
    Total accounts payable processing costs / Number of invoices processed forperiod

13. Days Payable Outstanding (DPO):

    This is another way to calculate thespeed at which a company pays for purchases obtained on vendor credit terms. ThisKPI converts AP turnover into a number of days. A lower value means the company ispaying faster. The formula for calculating days payable outstanding is:

    Days payable outstanding =(Accounts payable x 365 days) / COGS

14. Accounts Receivable (AR) Turnover: This measures how effectively thecompany collects money from customers on time. It reflects the number of times theaverage AR balance is converted to cash during a period, typically a year.It’s aratio calculated by dividing net sales by the average AR balance during the period.A higher AR turnover isgenerally desirable. The formula for AR turnover is:

    Accounts receivable turnover =
    Sales on account / Average accounts receivable balance for period

15. Days Sales Outstanding (DSO):

    This is another metric that companiesuse to measure how quickly its customers pay their bills. It is the average numberof days required to collect accounts receivable payments. DSO converts the accountsreceivable turnover metric into an average time in days. A lower value means yourcustomers are paying faster. The formula for days sales outstanding is:

    Days sales outstanding = 365 days /Accounts receivable turnover

16. Inventory Turnover:

    This operational efficiency metric shows thenumber of times the average balance of inventory was sold during a period, typicallya year. In general, a low inventory turnover ratio can indicate that the company isbuying too much inventory or that sales are weak; a higher ratio indicates lessinventory or stronger sales. An extremely high ratio could indicate that the companydoesn’t have enough inventory to meet demand, limiting sales. The formula forinventory turnover is:

    Inventory turnover = COGS / Averageinventory balance for period

    See Also

    The 4 Key Financial Metrics to Track for Business Success

17. Days Inventory Outstanding (DIO):

    This inventory management KPIprovides another way to determine how quickly the company sells its inventory. Itmeasures the average number of days required to sell an item in inventory. DIOconverts the inventory turnover metric into a number of days. The formula for DIOis:

    Days inventory outstanding = 365days / Inventory turnover

18. Cash Conversion Cycle:

    This calculates how long it takes a companyto convert a dollar invested in inventory into cash received from customers. Ittakes into account both the time it takes to sell inventory and the time it takes tocollect payment from customers. It’s expressed as a number of days. Theformula foroperating cycle is:

    Operating cycle = Days inventoryoutstanding + Days sales outstanding

19. Budget Variance:

    This compares the company’s actual performance tobudgets or forecasts. Budget variance can analyze any financial metric, such asrevenue, profitability or expenses. The variance can be stated in dollars or, moreoften, as a percentage of the budgeted amount. Budget variances can be favorable orunfavorable, with unfavorable budget variances typically shown in parentheses. Apositive budget variance value is considered favorable for revenue and incomeaccounts, but it can be unfavorable for expenses. The formula for calculating budgetvariance is:

    Budget variance = (Actual result–Budgeted amount) / Budgeted amount x 100

20. Payroll Headcount Ratio:

    This KPI is a measure of the productivityand efficiency of the HR team. It shows how many full-time employees are supportedby each payroll or HR specialist. The calculation is usually based on full-timeequivalent (FTE) headcounts. The formula for payroll headcount ratio is:

    Payroll headcount ratio = HRheadcount / Total company headcount

21. Sales Growth Rate:

    One of the most critical revenue KPIs for manycompanies, sales growth shows the change in net sales from one period to another,expressed as a percentage. Companies often compare sales to the corresponding periodduring the previous year, or quarter-to-quarter changes in sales during the currentyear. A positive value indicates sales growth; negative values mean sales arecontracting. The formula for sales growth rate is:

    Sales growth rate = (Current netsales – Prior period net sales) / Prior period net sales x 100

22. Fixed Asset Turnover Ratio:

    This shows a company’s ability togenerate sales from its investment in fixed assets. This KPI is especially relevantto companies that make significant investments in property, plant and equipment(PPE) in order to increase output and sales. A higher ratio indicates that thecompany is using those fixed assets more effectively. The average fixed assetbalance is calculated by dividing total sales by net of accumulated depreciation.The formula for fixed asset turnover is:

    Fixed asset turnover = Total sales/ Average fixed assets

23. Return on Assets (ROA):

    This efficiency metric shows how well anoperations management team uses its assets to generate profit. It takes into accountall assets, including current assets such as accounts receivable and inventory, aswell as fixed assets, such as equipment and real estate. ROA excludes interestexpense, as financing decisions are typically not within operating managers’control. The formula for return on assets is:

    Return on assets = Net income /Total assets for period

24. Selling, General and Administrative (SG&A) Ratio:

    Thisefficiency metric indicates what percentage of sales revenue is used to cover .These expenses can include a broad range of operational costs, including rent,advertising and marketing, office supplies and salaries of administrative staff.Generally, the lower the SG&A ratio, the better. The formula for SG&A ratiois:

    SGA = (Selling + General +Administrative expense) / Net sales revenue

25. Interest Coverage:

    A long-term solvency KPI, interest coveragequantifies a company’s ability to meet contractual interest payments on debtsuch asloans or bonds. It measures the ratio of operating profit to interest expense; ahigher ratio suggests that the company will be able to service debt more easily. Theformula for interest coverage is:

    Interest coverage = EBIT / Interestexpense

26. Earnings Per Share (EPS):

    This profitability metric estimates howmuch net income a public company generates per share of its stock. It’stypicallymeasured by the quarter and by the year. Analysts, investors and potential acquirersoften use EPS as a key measure of a company’s profitability and also as a waytocalculate its total value. EPS can be calculated several ways, but here’s awidelyused basic formula:

    Earnings per share = Net income /Weighted average number of shares outstanding

    Weighted average is basically the average number of shares outstanding — oravailable— during a given reporting period. The total number of shares can change duetostock splits, stock repurchase, etc. If EPS were based on the total shareoutstanding at the end of the reporting period, companies could manipulate resultsby repurchasing stock at the end of a quarter.

27. Debt-to-Equity Ratio:

    This ratio looks at a company’s borrowing andthe level of leverage. It compares the company’s debt with the total value ofshareholder’s equity. The calculation includes both short-term and long-termdebt. Ahigh ratio indicates that the company is highly leveraged. This may not be a problemif the company can use the money it borrowed to generate a healthy profit and cashflow. The formula for debt-equity ratio is:

    Debt-to-equity ratio = Totalliabilities / Total shareholders’ equity

28. Budget Creation Cycle Time:

    This efficiency metric measures how longit takes to complete the organization’s annual or periodic budgeting process.It’susually measured from the time of establishing budget objectives to creating anapproved, ready-to-use budget. This metric is usually calculated as the total numberof days.

    Budget creation cycle time = Datebudget finalized – Date budgeting activities started

29. Line Items in Budget:

    The number of line items in a budget orforecast is an indicator of the level of detail in the budget. A company can prepareits current budget by adjusting each line item in a previous budget to reflectcurrent expectations. Budgets are often prepared at the account level or by project.They may include line items that correspond to lines in the company’sfinancialstatements.

30. Number of Budget Iterations:

    This is a measure of the accuracy andefficiency of the company’s budgeting process. It is the number of times abudget isreworked during the budget creation cycle. A highly manual process can be moreerror-prone, leading to a greater number of iterations before the company arrives atan accurate budget. Other reasons for an increased number of iterations includeextensive internal negotiations, changes in business strategy or changes in themacro-economic climate. A high number of budget iterations can lead to delays and anincreased budget cycle time, which can hinder the company’s ability to startexecuting toward the goals defined in the budget.

    Number of budget iterations = Totalamount of budget versions created

Measuring and Monitoring KPIs With Financial Management Software

Beyond the common financial metrics and KPIs listed above, businesses may want to trackspecialized KPIs that focus on their inner workings or functions, such as those related toanalyzing inventory,sales, receivables, payables and human resources. Manually mapping and calculating financialKPI formulas from general ledger accounts can be a cumbersome, error-prone andtime-consuming process. That’s why many businesses use software to automate thesecalculations and create dashboards with all these key numbers in one place.

NetSuite’s robust accounting and financialmanagement software includes built-in real-time dashboards and KPIs tailored todifferent roles and functions within the organization as well as by industry. Users caneasily add customized KPIs to support specific requirements or goals. All information isautomatically updated as the platform processes transactions and other financial data.

Financial KPIs and metrics help business leaders, managers and staff quickly get the pulse ofhow their company is performing and track any important changes over time. They also helpleaders develop key objectives and keep their employees focused on measurable goals.Financial software that provides automated, accurate, real-time KPIs keeps the companymoving toward those goals, rather than getting lost in mounds of data and reports.

Financial KPI FAQs

What are financial KPIs?

Financial KPIs are metrics tied directly to financial values that a company uses to monitorand analyze key aspects of its business. Many KPIs are ratios that measure meaningfulrelationships in the company’s financial data, such as the ratio of profit to revenue.KPIscan be used as indicators of a company’s financial health at any point in time. Theyarealso widely used to track trends and analyze progress toward strategic goals.

What are examples of KPIs?

Companies use many different financial KPIs. The KPIs a company chooses depends on its goals,industry, business model and other factors. Common KPIs include profitability measures, suchas gross and net profit, and liquidity measures, such as current and quick ratios.

What are the five types of performance indicators?

The five primary types of performance indicators are profitability, leverage, valuation,liquidity and efficiency KPIs. Examples of profitability KPIs include gross and net marginand earnings per share (EPS). Efficiency KPIs include the payroll headcount ratio. Examplesof liquidity KPIs are current and quick ratios. Leverage KPIs include the debt-to-equityratio.

What are the five key performance indicators?

Each company may choose different KPIs, depending on its goals and operational processes.Some KPIs are used by a wide variety of companies in different industries, like operatingand net profit margin, sales growth and accounts receivable turnover. Companies may alsochoose KPIs that are specific to their industry. For example, manufacturers may track KPIsthat measure how quickly and efficiently they convert their investment in fixed assets andinventory into cash, such as fixed asset turnover and inventory turnover.