Financial KPIs (Which KPI is Important for Your Business?)

September 29, 2022

Financial KPIs (Which KPI is Important for Your Business?)

One of the most complicated things about going into any kind of business is probably learning to understand business and finance speak. It really is like a whole different language, full of complicated acronyms and abbreviations.

Financial KPIs are one of the common phrases that many entrepreneurs run into that might not be too familiar. Fortunately, these “key performance indicators” in finance are a little simpler than they seem at first. Here’s what you need to know.

Financial KPIs Meaning 

Whether you’re starting a new business or tracking the growth and performance of an established one, you will always have financial KPIs.

Some KPI finance examples are sales and revenue volumes, customer acquisition, brand recognition and so on. They’re measurable indicators of how your company is performing compared to previous years or periods and compared to your competitors.

Usually, whether you have a startup or an established business, you will have goals and targets that you need to reach to break even, make a profit and so on. Those are also key performance indicators in finance.

Financial KPIs for Startups 

If you are launching a startup, you probably don’t have any existing finance metrics to measure your progress against – unless you have previously built a similar company. Even then, however, financial KPIs are usually specific to the type of business, the market that you’re selling to, your current capitalization and other factors.

Often, financial KPIs for startups are based on what you want to achieve more than any other factor. Many startups also set aggressive key performance indicators in finance, which act as a motivator for their teams.

Often, these financial KPIs are also what you would call S.M.A.R.T. goals – Specific, Measurable, Achievable, Relevant and Time-Bound.

Over time, startups will gather more performance data to base their KPIs on, but when they first start out, it’s often based on assumptions and targets. The more information you track and data you gather, the better equipped you will be to see your performance over time, and that will help you to keep developing your goals and plans for your startup.

Financial KPIs for Not for Profit 

Not-for-profits have different goals than for-profit businesses, but they still have to pay attention to their financial performance.

KPI finance examples in the not-for-profit field include donation conversions, website traffic growth, donor acquisition and retention, fundraising acquisition and more.

In this case, instead of sales and revenue, the financial KPIs you will be tracking are specific to donations received by the organization. However, while the key financial metrics you track will be different, the goal is the same: to maximize income and minimize expenses.

Top Financial KPIs 

Regardless of what industry you are in and what kind of company you have, there are some specific finance metrics that accountants and finance professionals will track. These are the figures that are more likely to tell you the full story about how your business is doing. They are:

·   Revenue – the total value of your sales for a particular period

·   Current ratio – a measure of financial liquidity that measures your ability to pay short-term debt and obligations

·   Gross margin or gross profit

·   Net burn – which is the total amount of money your company spends every month that it’s in business

·   Net profit

·   CAC payback period – measures the time it takes to cover the cost of acquisition per client

·   EBITDA or earnings before interest, taxes, depreciation and amortization

·   Annual recurring revenue

·   Customer lifetime value, or how much each customer spends over their entire relationship with your company

·   Revenue per employee – how productive are your people?

·   MRR growth rate, or monthly retained revenue

Not all of these finance metrics will apply to every type of business, and some of the data measured might overlap slightly. However, choosing the right key performance indicators is crucial to make sure you are tracking the right information.

It’s just not enough to track sales and expenses. If you want to succeed in business and consistently grow your business, you need to dig a little deeper and add a few more key financial metrics to your watch list.

Non-Financial KPIs for Small Business 

So far, we’ve looked mostly at finance metrics you can use to track the health and performance of your company or organization. But there are many other important numbers that you could use to measure non-financial performance. These include:

Employee Retention 

It is not only disruptive but very expensive to recruit and retain new employees. Retaining the workers you already have is always the goal and measuring how long your team stays with your company is a great HR metric to track. You can even try exit interviews to find out why people who do leave make that choice.

Website Traffic 

Whether you like it or not, the internet is a huge part of modern business. Tracking website traffic, conversions and contact from your site, bounce rate, and more can all help to make (and keep) your business in the public eye in your area, and that usually means more business.

Customer Satisfaction 

Most small businesses dread online reviews. Very often, it’s only people who have had a bad experience who leave them! However, customer satisfaction is a very important addition to your main finance KPI list. Happy and satisfied customers will be more likely to be return customers and refer your business to a friend.

Conversion Rates and Retention Rates 

Of the customers you do reach, how many do you turn into a customer? Then, since we know that retaining customers is far cheaper than acquiring new ones, how many of your customers do you retain?

Timely Delivery of Products and Services 

Another of the important non-finance metrics you want to measure to track the overall health of your business is how well you adhere to customer due dates and delivery deadlines. If you are consistently missing these, it’s a sign that your timelines may not be realistic or that your productivity is not optimized.

Connect Your Accounting System to Your Financial KPIs Worksheets

As you can probably see, key performance indicators in finance and other areas of business are not a one size fits all situation. Every business will want to track slightly different things, and often, the best way to do that all in one place is by creating a spreadsheet.

If you use QuickBooks for your accounting needs, LiveFlow can help to keep your finance KPI list up to date all the time.

The LiveFlow platform creates a live link between QuickBooks and custom Google Sheets worksheets. You can map the data you need to track directly to the cells on the sheet, and every time your accounting system updates, so do your financial KPIs.

While it can’t help you to track customer satisfaction or conduct exit interviews, it can reduce your hands-on time tracking key financial metrics dramatically.

To learn more about LiveFlow or book a live demo, contact our team. We’re always ready to help our customers find more efficient ways to automate their financial reporting. We might even be able to offer you KPI finance examples that you can use to speed up the design of your own finance metrics worksheet.

Use LiveFlow for Automated and Accurate Financial KPIs Worksheets

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