Key performance indicators or KPIs are tools that can be used to measure and track the progress made in essential areas of your company’s performance. These are 12 KPIs that you should be tracking whether through an in-house finance department, outsourced financial management services, or company secretarial services UK.

Operating cash flow

Businesses have several routine operating expenses and tracking cash flow is essential to understanding your ability to keep up with expenses. While financial statement services and financial reporting services cover these expenses, by comparing the KPI with your total capital, you can understand if the business is generating enough cash for the sustenance of your business.

Working capital

Working capital refers to the cash that is immediately available to your business and is calculated by subtracting existing liabilities from existing assets. This is an important KPI to track as it informs you of the available operating funds of your business. A reliable finance business partner may use this KPI to advise you on how your short-term liabilities can be covered by your available assets.

Current ratio

When you divide total assets by liabilities, you can calculate your current ratio and an accountant in Ilford may use this information to understand the solvency of your business. This can be included in outsourced financial reporting services and company secretarial services.

Debt to equity ratio

In bookkeeping, your debt to equity ratio is the contrast between your total liabilities and shareholders’ equity or net worth. With this KPI, you can understand how well your business is funding its growth and utilising its shareholders’ investments. In other terms, your trusted business advisor will use this KPI to tell you how profitable your business is.

LOB revenue versus target

Compare your revenue for a line of business (LOB) to your projected revenue for it will give you an understanding of how well a particular department is performing financially and tracking and analysing this is important when running a business.

LOB expenses versus budget

It is also important to compare the actual expenses of your business to the budgeted amount. This KPI helps you understand where and how certain budgeted spending may have gone off track and how you can budget effectively in the future.

Accounts payable turnover

This KPI indicates the rate at which you pay off your suppliers. To calculate your accounts payable turnover KPI, your accountant or outsourced finance and accounting professionals will divide the total costs of sales during a particular period by your average accounts payable for that period.

A reliable financial business partner will study this ratio over a period of time. A decline in this KPI may indicate to an increment in the time taken for your company to pay off its suppliers. If this is true about your business, you may want to make certain changes to ensure your suppliers are paid off without delay.

Accounts receivable turnover

Information provided by statutory reporting services can give you the necessary information to calculate KPIs like the accounts receivable turnover rate. This is calculated by dividing your total sales for a period by your average accounts receivable for that period. This KPI presents the rate at which your business is collecting payments from customers.

Inventory turnover

Visualising inventory turnover can be difficult since inventory continuously flows in and out of your warehouse facilities. However, the inventory turnover KPI is useful to understand how much of your average turnover you have sold in a period.

Return on equity

With the return on equity or ROE indicator, you can measure your company’s net income in contrast to each unit of shareholder equity. This indicates if your net income is appropriate to the size of your company.

A trusted business advisor hired through outsourced finance and accounting services can advise you on steps to take depending on this KPI.

 Quick ratio

The quick ratio KPI is a measure of your company’s wealth and financial flexibility and shows your company’s ability to utilise its highly liquid assets to immediately meet any short-term responsibilities. If you are outsourcing your finance, the accountant or financial management services will use this KPI to assess the health and wealth of your company in a quick and easy way.

Customer satisfaction

Monitoring and analysing customer satisfaction is vital to your long-term success and an accountant in Ilford may use the Net Promoter Score (NPS) to calculate the various levels of positive responses customers provide through satisfaction surveys.