Part of crafting the perfect business strategy for your company is knowing which metrics to track. When it comes to monitoring performance, companies must use KPIs for Finance, or key performance indicators, to gain greater visibility over their company’s progress.
Our experts at Abacum have put together this list below of the best KPIs to track to support future performance.
What are KPIs in Finance?
A KPI, or key performance indicator, is a quantifiable measure that helps companies assess how well they achieve their growth objectives and strategic goals. KPI reporting can help a business set benchmarks, evaluate business performance, identify organizational strengths, and assess the organization’s success.
Why Finance KPIs Matter
We know how challenging it can be to juggle data from multiple systems and conflicting priorities. That’s why focusing on the right finance KPIs is essential for effectively managing profitability, securing liquidity, and fostering sustainable growth.
By leveraging these key metrics, finance professionals can make informed decisions that drive long-term success in a competitive market.
22 Most Important Finance KPIs
In this section, we’re going to be breaking down the different metrics by KPI category:
1. Profitability
1.1. Operating Expense
Also known as OPEX, measures how much it costs a business to cover its day-to-day operations. Expenses that are often considered may include inventory costs, payroll, rent, and more.
1.2. Sales Growth Rate
The sales growth rate is a critical metric that all organizations need to calculate. This KPI allows teams to see the organization’s sales growth over time. It’s usually owned by the Chief Revenue Officer or Sales leader and monitored closely by the CFO.
1.3. Gross Profit Margin
The gross profit margin calculates how much money is left over from revenue after subtracting the cost of goods sold. This metric is often used to see whether a company can pay its operating expenses while retaining leftover funds.
1.4. Net Profit Margin
The net profit margin, also referred to as an organization’s bottom line, is the specific KPI that measures a company’s efficiency at generating profit rather than revenue. The net profit margin is a percentage that shows how much of each dollar earned translates into actual profits.
1.5. Payback Period
This key metric is used to determine how long an investment takes to pay for itself. You can also think of the payback period as the breakeven point.
1.6. Interest Coverage Ratio
Anytime a company borrows money, it’ll have to pay interest. The Interest Coverage Ratio is calculated to ensure a company can pay back interest with its earnings before interest and taxes.
2. Leverage
2.1. Total Debt-to-Equity Ratio
The total debt-to-equity ratio is a metric used to calculate how much debt a company uses to finance its current assets against its shareholder’s equity. A high ratio can indicate that a company is using too much investment instead of generating its own income.
2.2. Total Debt-to-Asset Ratio
The debt-to-asset ratio is a financial KPI used to evaluate the total amount of debt a company has compared to its assets. While a small amount of debt helps an organization with expansion, too much debt can take a start-up down.
3. Valuation
3.1. Burn Rate
The burn rate is a metric that showcases the rate at which a company uses up its cash reserves in a loss-generating scenario. This popular metric is used when measuring the performance and assessing the valuation of a company. Since a start-up traditionally has a net income until it can get off the ground, investors will provide funding based on an organization’s burn rate.
3.2. Return on Equity
Return on Equity (ROE) is one of the most important KPIs for investors and shareholders. It showcases how well the company is utilizing shareholder equity, allowing investors to gain deeper insight into an organization’s potential profitability.
The CAGR is a financial performance metric that calculates the rate of return that would be necessary for an investment to grow from its initial balance to its ending one. Industry standards indicate an ideal current ratio between 1.0-2.0, though well-run retailers like Walmart operate safely at 0.83. This is a metric that CFOs often report to other shareholders.
3.3. Compound Average Growth Rate
The CAGR is a financial performance metric that calculates the rate of return that would be necessary for an investment to grow from its initial balance to its ending one. This is a metric that CFOs often report to other shareholders. The 2024 Working Capital Survey revealed $1.76 trillion in untapped working capital opportunities among top U.S. public companies.
3.4. Earnings Per Share
Earnings per share (EPS) is one of the leading KPIs for the financial reporting process. This key metric illustrates a company’s profit per outstanding share of stock. Often, EPS is either calculated on a quarterly or annual basis.
3.5. Net Present Value
The NPV is often used on a case-by-case basis to determine whether a project will be profitable. If the NPV is positive, it means the project or investment is worthwhile.
3.6. Future Value
The future value helps evaluate whether a project or investment will be profitable. This calculation uses an assumed rate of return to estimate the future value.
3.7. Internal Rate of Return
This financial KPI is used to estimate the profitability of potential investments. The IRR is calculated by taking the difference between the current and expected value and the original beginning value, divided by the original value, and then multiplied by 100.
3.8. Return on Investment
ROI is one of the most important CFO KPIs to track. Return on investment is a popular metric often used by CFOs and financial managers to evaluate the profitability of how well an investment performed.
4. Liquidity
4.1. Operating Cash Flow
OCF is one of the most basic metrics used by CFOs today. This KPI metric measures the total income generated by regular business operations. In a healthy organization, the OCF is positive and is used to decide how much capital expenditure a company can afford.
4.2. Quick Ratio/Acid Test
As a chief financial officer, if you’re looking to quickly evaluate your organization’s health, you’ll want to calculate your quick ratio business metric. This specific KPI shows whether a company has sufficient funds to cover short-term financial obligations immediately.
4.3. Current Ratio
While the quick ratio and current ratio are quite similar, the current ratio is a performance metric that shows a company’s ability to pay off all its financial obligations within a full year.
4.4. Working Capital
Working capital is a key performance indicator highlighting a company’s available assets to meet short-term financial obligations. Assets that contribute to working capital include cash, accounts receivable, short-term investments, etc.
4.5. Cash Conversion Cycle
The cash conversion cycle (CCC) is a business metric that indicates how many days it takes for an organization to convert its goods to cash.
Efficiency
5.1. Accounts Payable Turnover
This specific metric measures how quickly a company can make payments to its suppliers. If this number starts decreasing over time, it may indicate internal cash flow issues.
Tracking your FP&A KPIs: A few tips to Stay Zen
Are you slightly overwhelmed by all those financial metrics? Don’t you worry. Some of them are more important than others, and with a little bit of structure, you’ll be able to stay on top of your company’s performance while also maintaining your sanity. Here are some tips to get started:
5. Measurement & Monitoring Best Practices
Selecting reliable data sources is essential for accurate KPI measurement, a cornerstone of finance data governance. Automated workflows can eliminate repetitive tasks and reduce human error, while regularly reviewing variances against benchmarks or past trends provides clear signals about what’s working and where adjustments are needed.
Align your finance team’s KPIs with your broader company objectives or OKRs. KPIs act as a compass to measure whether you’re on the right track to achieve your company’s ultimate goals.
Shortlist the most important financial KPIs that will give you the insight you need depending on your priorities: an early-stage startup will focus on tracking growth while a more established organization may focus more on profitability metrics. Choose the FP&A KPIs that will help you navigate your current development phase.
Bring your leadership team together around your financial KPIs: ultimately, all functions are working together towards the same company goal, so make sure you bring your Sales and Marketing leaders on board, as their own key measures will directly affect yours, and vice versa.
Empowerment and accountability are essential, so make sure you periodically review results against FP&A KPIs and take action if you’re getting off-track.
Adopt the right technology to boost efficiency and ensure data accuracy, since modern finance departments today are shifting from Excel spreadsheets and turning to Excel alternatives such as FP&A software to help consolidate data, create KPI reports, and drive valuable insights for the rest of the team.
If you’re looking for a solution to help streamline your data into a centralized platform, Abacum is the perfect option. To see how the Abacum platform can help keep track of your critical FP&A KPIs, request a demo today.
Conclusion
As we move into 2025, staying ahead of financial complexities is more crucial than ever. By focusing on the right finance KPIs, you’ll find sustainable success and drive growth across your organization. If you’re ready to streamline your financial tracking, request a demo at Abacum and let our platform do the heavy lifting.
