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KPI's for finance department

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I'm the FC in a £7m turnover company, currently undergoing lots of internal changes.  One of which is that each department head is being asked to provide some KPI's by which their performance can be measured. 

As the only person in finance, the KPI's will be all about me!

Initial thoughts are:

- Debtor days (to be within a certain amount of days)

- timely and accurate completion and distribution of management accounts by a certain day

- accuracy of budget/forecast (think of an acceptable tolerance)

Anybody else had to think of KPI's for themselves, and is anyone willing to share their ideas?!

Thanks

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09th Jul 2018 17:32

- Creditor days (as in > x) Depends on what sort of company you work for.
- Bank balance

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09th Jul 2018 17:47

Depends on what your departmental/personal development plan is, alongside corporate priorities. (Ha!)

You can pick any number of measures but without knowing what your business is like they may be looking in the wrong direction. Do you have any sort of corporate plan or strategy to refer to?

Dr days and accounts prep time are pretty straightforward & boring. Cost per transaction (will help when the business grows)? How about scoring 'satisfaction with finance function from other depts' rather than accuracy of forecast?

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By Ranse
09th Jul 2018 21:16

KPI works best when in line with company strategy , some starting point would be ...reflecting on what the finance function means to the company and decide how integral these are , from there out , you will identify critical activities in the finance department that needs to be measured , once these are identified , you can proceed with the relevant KPI's e.g if cashflow is important then debtors days could be a kpi , lead time between sales and invoicing etc etc

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By kevin01
10th Jul 2018 09:18

Thanks all!
A bit of background.....we are web development company, currently with no corporate strategy (going through management change and growth at the moment!). Cash is important and the main concern for the shareholders, so debtors days is a good starting point.
But definitely take your point that we need a strategy before we can think about KPI's..... it's the old chicken and egg situation!!

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10th Jul 2018 10:46

You're the only finance bod in a £7m t/o company?! You should resist any KPI that isn't easily achievable because most days will be spent fire-fighting.

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By kevin01
10th Jul 2018 11:00

Yes, the only finance bod! I do everything to do with finance, even payroll for 60+ employees, so KPI's are not really top of my list of things to think about!

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to kevin01
10th Jul 2018 14:57

kevin01 wrote:

Yes, the only finance bod! I do everything to do with finance, even payroll for 60+ employees, so KPI's are not really top of my list of things to think about!


How long have you been there? Many years ago I was in a FC role where there was never enough time to produce all the reports requested let alone do the usual recurring stuff. It puts a big premium on your political skills. I discovered that working harder and harder wasn't the answer. It's an old saying but a true one "work smarter, not harder".
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By kevin01
to Red Leader
10th Jul 2018 15:23

I've been here 3.5 years and as we grow, there's certainly more requests for reports and additional information which does eat into my available time for the more mundane tasks.
I'm trying to make my life easier by automating most of the routine stuff! But it's certainly not easy juggling tasks and as you correctly say, trying to keep everyone happy is difficult!

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to kevin01
10th Jul 2018 15:39

Just keep the board happy. S0d everyone else! Though that does require you to interpret what they really really really want, not just what they say they want.

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10th Jul 2018 21:51

Surely there should be a need for an extra finance team colleague..I've known smaller companies with more in finance!

Is there for a team to be formed?

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By tom123
11th Jul 2018 09:37

Depends, I suppose, on line of work.

I have a team of 2, so 3 of us, for £4m - but that is including lashings of purchase orders, three way matching with GRN, £200k raw material stocks etc.

Your principal role is reporting, there is not so much you can in fact affect - unless you move into operational work - or get dragged that way.

Many years ago, I asked myself "What could I get sacked for", and my answer was "bad debts and stock errors".

So - I always look after those.

AP will tend to resolve itself.

Ask the board to set out their requirements.

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By kevin01
11th Jul 2018 09:58

I issue about 50 sales invoices each month, and process around 150 purchase invoices, we have no stock, so actually the mundane tasks don't take that long.

But there are definitely times when I could do with some help.....particularly when I'm being asked to do lots of reporting, I've got suppliers chasing for payment and it's payroll day!

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By tom123
to kevin01
11th Jul 2018 13:04

Do you use ODBC to retrieve data from your systems, and pivot tables to get the reports?

I would not do my job without that.

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11th Jul 2018 13:05

Free cash .... this is the only thing that is important .... cash follows from debtor days and creditor days so why not measure that.

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to Peter Kilvington
11th Jul 2018 13:10

Even then you need some rules. How much free cash is enough/too much? If lower cr days gets you better terms or priority then that would mean the kpi is working against the business.

Similarly keeping fee cash high but not investing...

It's all about the strategy

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By tom123
to WhichTyler
11th Jul 2018 14:54

WYMIWYG!

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12th Jul 2018 13:28

When I was in industry in a similar businesss, the ratio of employee costs to net sales was a key KPI for us, since our employee costs were (relatively) static as we had to be able to respond quickly to client demands.

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