These days, being a CFO is about way more than just reporting on finances. Yes, tracking cash flow, planning budgets, and letting everyone know how the company is performing financially is still a core part of the role. But CFOs are also key players in mapping out the strategies and plans of action to hit those financial targets.
As a CFO, you've got to be clear on which specific metrics and KPIs give you the best snapshot of how the business is doing. And we're talking KPIs at two levels here:
- 🏢 The company-wide financial KPIs that show overall money performance.
- 🧍🏽Personal KPIs for you as the CFO to gauge how effectively you're doing your job.
This guide covers 32 of the most important CFO KPIs to track.
First, we’ll look at the ones that'll give you a solid overview of the company’s financial health and performance. Then, we’ll move into the metrics your superiors may use to measure your professional performance.
Table of contents
Company financial performance KPIs
The best way to understand and assess your company’s financial performance is by tracking the right CFO KPIs.
We’ve divided the main ones into four categories:
- Revenue and profitability: These KPIs track your company’s revenue and the profitability generated from it.
- Operational: Use these to assess how well your company is managing operations and controlling costs.
- Financial efficiency: These look at how efficient your company is at leveraging assets to generate profits.
- Liability: You can use these metrics to analyze how well your company manages debt, payroll, and equity financing.
Below, we’ll describe the KPIs that CFOs commonly measure across each of these four categories. You can then use this breakdown to help decide which metrics you want to use to evaluate the financial position of your company.
Revenue and profitability
Revenue and profitability KPIs track the company's overall financial health and growth. These assess its ability to generate income, identify areas for cost optimization, and make informed decisions regarding things like pricing strategies, resource allocation, and growth initiatives.
1. Revenue growth rate
Measures the increase or decrease in a company's revenue over some time.
2. Gross profit margin
Shows the percentage of revenue remaining after deducting the cost of goods sold (COGS).
3. EBITDA
This measures profitability by considering earnings before interest, taxes, depreciation, and amortization.
4. Compound annual growth rate (CAGR)
Calculates the annualized growth rate over multiple periods.
5. Revenue variance analysis
Breaks down the difference between actual and budgeted revenue, identifying areas of under or even over-performance.
6. Return on assets (ROA)
Reveals how efficiently a company generates profits from its assets.
7. Net profit margin
Shows how much net income a company earns per dollar of revenue.
8. Earnings per share
Calculates the portion of a company's profit allocated per outstanding share of stock.
Operational
Operational KPIs are useful to gauge the efficiency and effectiveness of the company's day-to-day operations. They're used to pinpoint any bottlenecks, streamline processes, manage working capital, and more.
9. Operating cash flow
Measures cash generated from core business operations.
10. Cash conversion cycle (CCC)
This measures the average time it takes a company to convert its inventory and receivables into cash.
11. Accounts payable turnover
Indicates how many times (per a specific period) a company pays its accounts payable.
12. Accounts receivable turnover
Shows how many times per period a company collects its accounts receivable.
13. Budget variance
Compares actual performance and costs against what was budgeted.
Financial efficiency
Financial efficiency KPIs measure how the company manages its financial resources and can tell you if it's doing so effectively. You'll turn to these KPIs when you want to assess capital structure, evaluate investment opportunities, and ensure optimal utilization of assets and capital to maximize shareholder value.
14. Return on equity (ROE)
Measures profitability by calculating how much profit is generated with shareholders' invested money.
15. Cash runway
Estimates how many months/years a company can continue operating before running out of cash.
16. Days sales outstanding
Shows the average number of days it takes to collect payment after a sale.
17. Days payable outstanding
Calculates the average number of days a company takes to pay its accounts payable.
Liability
Liability KPIs are used to help manage the company's debt obligations and financial risk. CFOs use liability KPIs to measure how well the company can meet its short-term and long-term debt obligations.
18. Working capital
This formula measures a company's liquidity and ability to meet short-term obligations with current assets.
19. Quick ratio
Measures a company's ability to pay current liabilities with its most liquid assets.
20. Debt-to-equity ratio
Compares a company's total debt to its shareholders' equity to evaluate financial leverage.
Sabrinthia Donnelly
CFO KPIs & performance metrics (No.21 - 32)
The CFO KPIs we covered above are to track the company’s financial health. But there’s more to the story than that.
As the CFO, you’re not just measuring company KPIs. You're also measured based on your performance and output as CFO.
CEOs and board members use metrics to help measure the performance of their team members, including the CFO. By knowing these personal "benchmarks," you can focus on things that'll help you grow in your career.
Here are some key areas they'll be looking at:
21. Financial performance
At the end of the day, the company wants to see if you're delivering results or not. So, expect them to keep a close eye on those CFO key performance indicators that show whether you delivered on the financial targets they set for things like profit margins, cash flow, and revenue growth.
If those numbers aren't where they're supposed to be, you can bet they'll have some questions for you.
22. Aligning strategies with company goals
Another area of interest will be if your financial plans line up with the company's bigger goals.
For example, did your cost-cutting measures free up resources for growth initiatives?
A top CFO must manage financial resources wisely (like optimizing revenue streams and minimizing risks).
23. Leadership and vision
CFOs are often measured based on their leadership skills. The company wants to see how well you lead the finance team and whether you have the necessary people skills.
Some of your main priorities to help showcase your leadership skills could include things like:
- Guiding the team through periods of change and transformation
- Building a strong team that thrives
- Stepping into a mentorship role for junior team members
- Communicating with clarity and patience
- Leading by example and with integrity
24. Problem-solving
Another big thing that leadership will assess when measuring your performance as a CFO is how well you troubleshoot problems.
Senior management and the board want to know you're the type to get ahead of financial hiccups, spotting them early and putting a plan in place to deal with them.
CEOs love a CFO who's always a few steps ahead. So, try to build your problem-solving skills and sharpen your critical thinking skills too.
25. Risk management
The higher-ups know that curveballs can come out of nowhere in any industry. So when things happen unexpectedly, they're counting on you to have that sixth sense and see it coming from a mile away.
That's why they'll be poring over numbers like the debt-to-equity ratio and the company's credit rating. If those are looking dicey, it's a sign you might not be staying ahead of potential storms on the horizon.
26. Cash flow management
The company needs to know you can keep the money flowing. So, expect that they'll assess your ability to manage cash flow. This includes making sure there's always enough money for bills, growth, and taking advantage of opportunities.
A couple of tips to help keep up:
- Stay on top of your cash flow forecasting. Having projections mapped out for the next six months or even the year can help you anticipate any potential cash crunches before they happen.
- Don't sleep on your receivables. You need to stay disciplined about invoicing and collections to keep that revenue stream steady.
- Be strategic about your payables. Negotiate terms with vendors, but don't stretch payables so far that you end up straining relationships.
27. Capital management
A great CFO isn't just about bringing in the money, it's about using it wisely. Those who'll be assessing your performance want to be sure you're putting money in all the right places. So, they'll look at how you allocate capital to different areas.
Are you investing in projects that actually have legs to drive real growth? Can you make that dollar stretch further without sacrificing quality?
These are the type of questions the company will need answers to.
28. Stakeholder management
Being a great CFO isn't just about spreadsheets and bottom lines. It's about building relationships.
So, take time to get to know your stakeholders. Talk their language (in other words, try to use less finance jargon they may not understand).
And, show them you understand their concerns and can explain complex financial matters in a way that makes sense - that's the kind of CFO who gets noticed.
29. Budgeting
Seeing if you can allocate resources and ensure teams stay within their budgets is something that'll be closely monitored.
This means allocating resources strategically, making sure each department has what it needs to succeed without going overboard.
30. Financial reporting
Numbers are important, but stories resonate. CEOs rely on CFOs to translate financial data into clear, concise reports.
Can you paint a picture of the company's financial health? Do your reports provide valuable insights for decision-making?
A proficient CFO can utilize data to communicate the company's financial trajectory to internal and external stakeholders effectively.
31. Forecast accuracy
CEOs value CFOs who can create accurate financial forecasts. They don't expect you to predict the exact future by any means. Still, they want you to use your financial expertise to anticipate trends and potential roadblocks.
By providing reliable financial forecasts, you become a strategic partner to the business, helping it navigate the road ahead confidently.
32. Financial accountability
A strong financial foundation requires a team effort. CEOs look for CFOs who can foster a culture of financial accountability across the company.
Do employees understand the financial implications of their decisions? Can you implement processes to ensure responsible spending?
A great CFO empowers everyone in the company to be financially responsible.
FAQs: CFO KPIs
How is CFO performance measured?
CFO performance is usually measured by evaluating different areas of the role, such as how well they manage the company’s financial health and how effectively they contribute to achieving strategic goals. Some top CFO KPIs might include the accuracy of financial forecasting, the speed (and efficiency) of closing financial books, cost management, leadership qualities and more.
What are two metrics a CFO should always monitor?
The two metrics a CFO should always monitor depends on their industry. However, two really important metrics for the CFO are the Return on Investment (ROI) and Operating Cash Flow. ROI measures the profitability of investments and is crucial for assessing the efficiency of spending. Operating Cash Flow calcualtes the total cash generated by the company’s regular business operations, which is important for evaluating the company's liquidity and its ability to sustain and grow operations.
Why are KPIs important in finance?
KPIs are crucial in finance because they provide a quantifiable measure of performance and health within a company.
How do you measure the success of a CFO?
The success of a CFO can be measured through a blend of financial metrics, strategic achievements, and leadership effectiveness. Financially, success might be assessed via growth in revenue, improvement in profit margins, and the company's financial position. Strategically, the ability to contribute to significant business decisions, manage risks effectively, and innovate in financial practices are key markers. Leadership can be evaluated through team performance, retention rates, and the development of strong relationships both internally and externally.
What ratios do CFOs use?
CFOs often use financial ratios such as the Debt-to-Equity Ratio and the Current Ratio. These help CFOs ensure the company maintains a healthy balance between its obligations and the resources available to meet them.
