The CFO’s Definitive Guide to Cash Flow Performance Finance KPIs

With the amount of data now being generated by a wide range of business systems, today’s CFOs are able to track and measure many more key performance indicators (KPIs) than their predecessors. Besides the traditional gross profit, net profit, and return on equity measurements, here’s a look at some of the most informative metrics worth monitoring to give you a better sense of cash flow performance and overall company financial health.

Average Days Delinquent (ADD): This is the average number of days it takes to collect late payments, which helps gauge the effectiveness of your collection efforts.

Burn Rate: A measure of how much your business is spending on a weekly, monthly, quarterly, and annual basis, which indicates its financial health at those specific points.

Collection Effectiveness Index (CEI): This comparison between the amount of receivables collected in a given time and the receivables available in that same period shows how well your collection efforts are working for you.

Current Accounts Payable: This is the sum of all money owed by your company in a given time, a key component for cash flow management.

Current Accounts Payable Turnover: This KPI measures how quickly your business pays its obligations.

Current Accounts Receivable: The sum of all money owed to your company in a given time, another vital metric for cash flow performance.

Current Accounts Receivable Turnover: This metric shows how quickly you collect your accounts receivables.

Current Ratio: By dividing your current assets by your current liabilities, you can see if you’re bringing in enough cash to pay your obligations.

Days Payment Outstanding (DPO): The average number of days it takes your business to pay its bills and obligations.

Days Sales Outstanding (DSO): The average number of days it takes your business to collect on a sale. Comparing it to your DPO provides you with a DSO-to-DPO ratio. The goal is a positive DSO-to-DPO ratio.

Debt to Equity Ratio: When you divide your total liabilities by your shareholder investments, it shows how effectively you’re using your investments.

LOB Expenses vs Target: To find out how efficiently a certain line of business (LOB) is performing, you compare its actual expenses to its budget.

LOB Revenue vs Target: Similarly, you can assess a particular LOB’s success by comparing its actual and projected revenue.

Operating Cash Flow: This metric looks at the total amount of money generated by your company’s day-to-day operations, which either reveals a positive cash flow or negative cash flow.

Quick Ratio: By dividing your cash, accounts receivables, and short-term investments by your current liabilities, you get a more real-time cash view than shown by the Current Ratio.

Working Capital: Another key indicator of cash on hand, your working capital is your current business assets minus your current business liabilities.

Can you easily track, report, and act on your finance KPIs?

Advanced finance technology is the reason CFOs can now efficiently measure and instantly act on so many informative KPIs, which helps drive growth, profitability, and overall competitiveness. Want to find out how to streamline your metrics capabilities? Let Tesorio give you a demo of its digital finance tools today.