An Insight into Key Performance Indicators (KPI) for Finance and Accounting Professionals!

Key Performance Indicators (KPIs) are key metrics to determine the performance quality of business processes over a period. It allows business owners to understand, whether operational execution complies with the business objectives or goals. Besides, KPI for finance department also compares a company’s overall performance, internal finance and accounting processes, and more with its competitors.

By understanding KPIs, finance and accounting professionals can identify areas of strength and areas that require improvement within their organizations. Whether it’s monitoring profitability, analyzing cash flow, or evaluating operational efficiency, KPIs serve as benchmarks for measuring progress toward organizational goals.

Types of KPIs: Financial vs. Non-Financial Indicators

In finance and accounting, KPIs can be broadly categorized into two main types: financial indicators and non-financial indicators. Financial indicators focus on monetary metrics and are typically quantitative, providing concrete financial performance data. Financial KPIs include revenue growth, profit margins, return on investment (ROI), and debt-to-equity ratio.

On the other hand, non-financial indicators encompass a broader range of metrics that may not directly involve monetary values but still play a crucial role in assessing overall performance. These indicators often relate to aspects such as customer satisfaction, employee productivity, and operational efficiency. Examples of non-financial KPIs include customer retention rates, employee turnover rates, employee satisfaction scores, and quality control metrics.

Both financial and non-financial KPIs are important for gaining a comprehensive understanding of organizational performance. While financial indicators provide insights into the bottom line and financial health of the organization, non-financial indicators offer valuable perspectives on other critical aspects that contribute to long-term success, such as customer loyalty and internal processes.

What are the KPIs for the Finance and Accounting Department?

For performance monitoring, you need to set KPIs for your team to help them strategic business goals in the long run. Let’s dive into the same:

1. Soft skills

   Soft skills are crucial for professionals’ personalities, and this holds true for accounting managers as well as accountants. Accountants should be polite and capable of putting their points across. They should be good listeners too, and open to suggestions of the team members. They should be ready to interact with the clients and work on their communication skills for the same.

   All these things define the right attitude of accountants, which is the first requirement for hiring proficient accountants.

2. The Key Qualifications

   Industry Expertise: It is recommended to hire an accountant who holds experience in your industry type since he is aware of all the accounting practices and legal compliances with the industry.

   Size: It depends upon your trust in a freelancer accountant or an accounting firm. You may hire an accounting firm big in size or a group of accountants as per your needs and budget.

   Complexity: Based on the accounting specifications of your business, you may hire accordingly. If you need an accountant to prepare the taxes at the end of the year, you may opt for a single business accountant, and increase the accounting budget if you need accounting services throughout the year for getting various accounting practices managed.

   Certifications: There are a few certifications that account specialists should have which makes them trustworthy, which are listed below:

   • Certified Public Accountant (CPA)
   • Certified Financial Analyst (CFA)
   • Certified Fraud Examiner (CFE)
   • Certified Government Auditing Professional (CGAP)
   • Certified Management Accountant (CMA)
   • Enrolled Agent (EA)
   • Certified Internal Auditor (CIA)
   • Certified Information Systems Auditor (CISA)
   • Certified Bank Auditor (CBA)

3. Moral Commitment

   There are a lot of companies that close down due to the sole reason that management at the senior level fails to identify unethical practices of the accountants. For example, a major telecommunications company, WorldCom, closed down in the year of 2002 as a result of accounting fraud, leading to a loss of $180 billion and around 30,000 jobs.

   This fraud would have never occurred if the management had trained, disciplined, and observed their accountants for following only ethical practices. So, make sure your accountants give attention to details and stay compliant with laws. And how you can ensure this by setting moral communication as KPI for finance department.

4. Adopting Latest Technology

   Literacy in computer and familiarity with software for word processing and spreadsheet is one of the most important qualities that KPI for finance department need to have in the present scenario. There is a lot of pressure on accountants for error-free financial management, and this can only be achieved when manual efforts are replaced with the use of technology.

   So, it is evident that the accountants adopt the latest technology which helps in streamlining the accounting operations of the business, and also boosts their performance.

5. In-depth Detailing during Deadlines

   Accounting deadlines are a part of reality, and every business can relate to it. An accounting manager or an accountant should make sure that error-free reports are passed on during the deadlines after in-depth analysis.

   Apart from this, he should have the intelligence of assessing the data and make conclusions regarding its relevance, consistency, and more importantly, user-friendliness. All these qualities make for a competent and reliable accountant that each and every business wishes to hire.

6. Business Issues Understanding

   Today, accounting for business is not just confined to dealing with the numbers or audit the financial statements of a company but understand a business completely and offer valuable suggestions.

   An accountant who has knowledge regarding a business from head to toe and actively participates in strategic business planning, along with providing valuable financial insights to help the owners make a good decision is surely going to win hearts and get promoted quickly to the top management positions. This is the quality metric that business owners seek while hiring a new junior or senior accountant.

The Benchmarks For Finance and Accounting Professionals

The above-discussed metrics brief about the qualities that accountants must possess in order to perform exceptionally well in their roles and the following are the benchmarks against which their work qualities and productivity are assessed:-

• Net Profit (net revenue vs. net expense)

  : With this, KPI for finance, need to show the revenue left with the business after covering all the expenses.

• Net Profit Margin (total profit upon total revenue)

  : Shows the effectiveness of a business in making a profit out of revenue.

• Gross Profit Margin (revenue vs goods sold cost upon revenue)

  : Determines the authenticity of business pricing on services and goods.

• Sales Growth (sales figures comparisons against time periods)

  : Provides clues regarding an organization’s growth with yearly comparisons.

• Current Ratio (current assets upon current liabilities)

  : Shows overall business solvency; how much more a business earns than it spends.

• Receivables Aging (sequential data of unpaid invoices)

  : Extremely useful when it comes to diagnosing any issue related to cash flow.

• Sales and Revenue

  : These vary greatly from one service and product to the other. It is imperative not to sell ‘less profitable items’ more and try to sell ‘more profitable items’ as much as possible to have maximum sales and revenue.

• Sales Target

  : Measurement of the sales of a particular service or product against a specific period of time, providing opportunities for previous performance comparisons and sales goals.

• Staff Productivity

  : Tracking of every employee’s contribution to the generation of business revenue.

Conclusion

Key Performance Indicators (KPI) for finance department are surely one of the best ways to hire the best finance and accounting professionals and also assess their capabilities against the business objectives and goals. There are times when business owners do not have the time to do such level of detailing for their accountants during the hiring time or assess their accounting performances later on.

In such cases, outsourcing is the most appropriate option as outsourcing firms follow the same KPI metrics while providing business accounting services to their clients. Also, the business owners save considerably on the infrastructure and hiring costs, making it a win-win situation for them and the outsourcing firm.

If you are looking for a reliable company to outsource accounting services, contact Cogneesol. At Cogneesol, we ensure that the same KPI for finance department are followed while managing the accounting services. We also offer a free trial. Contact us now at +1 833-313-3143 or email us at [email protected].