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Financials 2011: Nine KPIs for Finance Organizations

by Davin Wilfrid

March 10, 2011

By Davin Wilfrid, senior analyst, insiderRESEARCH

By now, everyone knows that developing key performance indicators (KPIs) is key to aligning a company's strategy to execution. But defining those KPIs is a far more difficult challenge than many anticipate. KPIs need to be broad enough to reflect trends across multiple metrics, but specific enough to give management real insight into corporate performance.

In the second part of the Financials 2011 conference keynote address, SAP's James Fisher (VP of marketing for Finance and EPM) laid out nine KPIs that typify a best-run organization. The nine KPIs are grouped into three broad objectives for financial performance:

Objective: Ensure regulatory compliance and effective risk management

KPI 1: Number of financial restatements

KPI 2: Percentage revenue at risk

KPI 3: Dollar amount of fines for non compliance

Objective: Outperform stakeholders financial expectations

KPI 4: Return on capital deployed

KPI 5: Total return to stakeholers

KPI 6: Number of earnings warnings

Objective: Deliver superior service at reduced cost

KPI 7: Days to close books

KPI 8: Cost of finance as % of revenue

KPI 9: Days sales outstanding

Obviously different organizations (consultants, analysts) will offer their own guidace on KPIs, and each company will need to customize according to their own needs. But starting with a baseline of strong KPIs is a must.

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