Finance deals in numbers all day. But how often are you generating numbers to find out how efficient your finance team is?
With all Finance has to get done in a given day sometimes it’s hard to find the time to step back and track how efficient and effectively your department is running.
But benchmarking is more critical than ever. By monitoring your functions’ performance you can determine where you can streamline, boost efficiency (and possibly cash flow) and incentivize staffers to do an even better job.
So what are the best metrics out there? We’ve collected the ones your peers rely upon most and grouped them by department.
How many of them are you currently using … and how many more could you be?
- Cost per invoice (Total department spend [including allocated overhead] divided by the number of invoices processed)
- Time to process invoices (Average time from when an invoice is received to when it’s ready for payment). Note: Don’t factor in actual payment time, since you probably do some strategic payment timing.
- Percent of invoices paid within terms
- Early pay discounts (percentage of invoices you can pay without paying the total invoice amount)
- Percent of duplicate or erroneous payments
- Days payable outstanding (accounts payable divided by cost of sales) * Days)
- Days sales outstanding (Total Accounts Receivables/Total Credit Sales) x Number of Days in the period that is being analyzed)
- Best possible DSO (Best Possible DSO = Current Receivables/Total Credit Sales X Number of Days)
- Collections Effectiveness Index
Beginning receivables + Monthly credit sales – Ending total receivables
————————————————————————————- x 100
Beginning receivables + Monthly credit sales – Ending current receivables
- Average days delinquent (average number of days invoices go past due)
- Cost per payroll payment
- Error rates
- Number of manual checks cut
- Days to process new hires
- Cost per payroll inquiry
- Days to resolve payroll inquiries (Note: You could also use this in A/P with days to resolve vendor inquiries and in A/R for customer questions.)
Whether you’re currently using a handful or the whole lot of these metrics, one thing’s a must: Let your staffers know what you’re using to track the department as well as their individual progress.
The last thing you want is for people to think you’re trying to “catch them” doing something wrong in their jobs. Better to position metrics as a way to raise the bar and a springboard to figure out what needs to most attention.
Are there any other metrics you find effective that didn’t make the list? Please share them here.