SUCCESS METRICS
Measuring Cost Reduction
Days to close books
Finance organizations need to officially “close” the books at the end of every reporting period, usually monthly. This process involves account reconciliation, making adjusting entries as needed to record accruals, depreciation, inventory, etc. and making closing entries. After the entries are done, financial statements are prepared, reviewed and audited.
The time it takes to perform this process varies depending on the complexity of the work to be done and the availability of data. Shortening the close process is an important metric for financial leaders because it indicates a higher level of efficiency, it reduces the time resources are spent on these repetitive tasks and it makes financial data and reports available earlier.
Days Sales Outstanding (DSO)
DSO measures the average number of days it takes a company to collect payment from its customers after a sale has been made. DSO provides insights into the effectiveness of a company’s credit and collection policies and indicates its ability to convert sales into cash.
Closely related, and sometimes overlooked, is Days Unbilled Outstanding (DUO) which measures the number of days it takes for a company to invoice its customers for products or services that have been delivered or completed but not yet billed.
Lowering both these numbers indicates that a company is billing quickly and accurately and customers are paying promptly, leading to faster revenue recognition and improved cash flow.
Reallocate Headcount
As financial processes become more efficient and automated, fewer FTEs are required to perform routine tasks. This is a great opportunity to reallocate their efforts to higher-value-added tasks that are more interesting to employees and beneficial for companies.
As a metric, this could be tracked by showing fewer people involved in the close process, for example, and more people doing analysis and gaining deeper insights into financial trends.
Maintain Compliance
Financial leaders need to achieve and maintain compliance with various regulations and standards depending on the jurisdiction, industry and nature of their organization. Those may include:
Financial Reporting
Compliance with accounting standards (GAAP, IFRS) to ensure financial reports are prepared and reported properly and all required disclosures are made.
Regulatory
Compliance with bodies like the SEC in the US, the FCA in the UK and others in relation to securities trading, anti-money laundering, data protection, consumer protection and more.
Tax
Compliance with the tax laws and regulations of the jurisdictions in which the company operates. This includes accurate reporting, calculation and payment of taxes and fulfilling other tax obligations.
Internal Controls and Governance
Establishment and compliance with policies and procedures to safeguard assets, prevent fraud, ensure segregation of duties and maintain accurate financial records.
Industry-specific
Healthcare, financial services and other industries have specific regulations that apply to their sector
Ethical Standards
Compliance with standards and principles of professional conduct.