Alex Chan | Content Strategist | February 12, 2024
Today’s chief financial officers continue to bear the responsibility of tracking cash flow, financial planning, and reporting on the company’s financial performance, but they’re also increasingly a central force in the operational and strategic planning that help a company meet their financial goals. This means CFOs must deliver a clear point of view on which metrics—known as key performance indicators (KPIs)—best capture the company’s performance. CFOs then need a strategy for tracking and sharing more broadly those metrics to pinpoint opportunities for improvement and rally the company to act on them. To achieve all this, CFOs must map out what specific metrics need to be tracked and build a dashboard to gather and display these metrics.
A CFO key performance indicator (KPI) is used to measure financial performance, and by extension the performance of the CFO. CFO KPIs are metrics that help a finance team track how a company is doing and make well-informed decisions to maintain success or get the company back on track. CFO KPIs help companies understand their financial performance by offering insight into their efficiency, profitability, and risk management. Emerging KPIs related to sustainability could rise in importance, depending on what regulators require and how much investors weigh environmental factors in their decisions. Sharing these KPIs more broadly beyond finance can help the company spot problems or successes early and help keep business unit leaders focused on the right outcomes.
Finance leaders use a CFO dashboard to access an overview of their company’s financial performance and health. It is an analytical tool that provides a centralized location to access real-time data and see KPIs. Having a dashboard gives CFOs the ability to track, analyze, and report on key financial figures. This helps a leadership team understand the company’s fiscal health, identify areas for risks or improvements, and develop a company strategy to reach their financial goals.
The KPIs to include in your CFO dashboard will depend on your company’s goals and requirements, but they should help leadership know how the company is performing; what potential risks they face in areas such as cash flow and liquidity; and help when making crucial financial decisions, such as expansions, acquisitions, layoffs, or divestitures. Sustainability KPIs can measure the environmental impact of business operations.
To help CFOs address these tasks, here are some commonly used financial KPIs, plus a couple of emerging sustainability measures:
Revenue and profit:
A CFO KPI dashboard will have a combination of visuals and metrics to help you make educated and swift financial assessments. Having KPIs in a dashboard makes it easier to regularly assess metrics that matter to the business to keep leaders focused and help them spot problems or success early. Having relevant metrics at hand also help your business create strategies with clear financial goals. To be relevant, however, a CFO KPI dashboard must be fed with timely, accurate data.
The goals of your business will ultimately inform which financial KPIs you should track.
In addition to being quantifiable and actionable, the most effective KPIs will align with your company’s goals. For instance, is profit and cash flow most important in the coming year, or is revenue and market share growth more important, even at the expense of profit? Those strategic decisions will shape which KPIs get top billing and attention in a dashboard. So if the goal is to improve the company's cash position over the next year, then a measurable goal could be “increase cash flow by 15% in 12 months,” and critical KPIs could include specific targets for operating cash flow, cash conversion cycle, and EBITDA margins.
When thinking about the KPIs that should be included in your CFO dashboard, think about your organization’s financial goals, size, maturity, industry, business model, fiscal policy, operating processes, and other components. A comprehensive CFO dashboard will let you quickly analyze your company’s financial health.
In terms of sustainability metrics, there’s no hard-and-fast consensus yet on which KPIs are most useful and influential. Regulators will have a big influence on this as they create reporting requirements. So will investors, to the extent that asset managers and retail investors make their investment decisions based on environmental factors, such as carbon emissions.
Dashboards typically include graphs and reports that help pinpoint financial risks and opportunities for improvement. In addition to companywide metrics, applying these KPIs at the business unit level can offer insight into which products or services are most popular with customers, which areas are most expensive to run, and any areas that are a drag on the company’s performance.
KPIs are used to quantify financial performance. To help your organization achieve its financial goals, you must have a strong understanding of your current performance by analyzing the right KPIs.
Here we will explore the most commonly used KPIs, so you can determine which ones your organization should be tracking:
These KPIs show how a company’s revenue is trending and how much profit it generates from that revenue.
These KPIs show how well the company is running, with particular emphasis on how well the company turns operating activities into cash.
These KPIs measure how effectively a company is using investors’ capital, including cash.
These KPIs assess how well-equipped companies are to meet their debt payments, payroll, and other cash obligations.
Sustainability KPIs increasingly influence investor decisions, regulatory compliance, and long-term financial performance.
With the right data—in a useable format—CFOs and other business leaders can develop and execute the strategies that boost growth and profit. Oracle Fusion Cloud Financials is a platform that gives your finance team the data they need to understand their organization’s financial health, increase forecasting accuracy, improve risk management, and simplify decision-making. CFOs can access dashboards that pull data from across the company, providing a comprehensive and real-time view of their organization’s finances and operations. Oracle Cloud Financials is used by global companies in a variety of industries for actionable insight and time-saving automation.
What are some top priorities a CFO can track using KPIs?
The CFO can track vital performance factors, such as liquidity needed to meet short-term obligations, like debt payments and payroll, how long it takes to turn finished goods into cash, how well the company is using investors’ money to create profit, and how fast the company is growing in terms of sales and profit.
What are the most important capabilities of a CFO dashboard?
A CFO dashboard, first and foremost, must be accurate and up to date. After that, it must be able to display information clearly and quickly, present trends and changes in data over time, and be easily customizable and let the CFO drill down into details.
What KPIs are most important for a CFO’s dashboard to monitor often?
Quick ratio and current ratio are critical because they measure the company’s ability to meet near-term financial obligations.
What are the most important components to include in a CFO dashboard?
The most important elements for a CFO dashboard are revenue, costs, and profit; cash flow and cash positions; and return on capital.