Key performance indicators (KPIs) give finance and accounting (F&A) teams data that helps them understand how they handle the month-end close. This information becomes even more important when organizations are thinking about scaling the business because financial close KPIs give deeper insights into the F&A team’s operations.
KPIs will look slightly different to each organization, depending on what metrics they’d like to track and insights they’d like to gain. However, there are a few that every organization should consider that help provide insights into the overall health of the financial close.
The top four financial close KPIs to track are:
- Exposure – what risks does your organization encounter on a day-to-day basis?
- Cost – how much does your financial close cost each month?
- Time – how long does it take to close each month?
- Quality – are reconciliations done correctly and accurately?
Taking a holistic view of current organizational practices allows teams to process data strategically and see what can be improved. When organizations track these four financial close KPIs, they can better understand their F&A team’s operations and performance at any given time. And with new understanding, comes new opportunities for growth and scalability.
The 4 KPIs to Track
KPI #1: Exposure
Any operation within an organization has a level of risk associated with it. These risks can range from digital to financial to reputational, and all impact the business. Understanding and tracking these risks allows F&A teams to be proactive in their approach to managing risk. Investing in financial close software helps mitigate risks associated with the month-end close by enabling standardization, automating data entry, and providing documentation related to the close with the click of a button.
KPI #2: Cost
By understanding the costs associated with the month-end close, F&A teams gain a better picture of how efficient their financial close is. When cost is compared with the time it takes to process reconciliations, teams can see what operations can be scaled to deliver faster and more efficient financial close reporting. This also helps F&A teams understand their workload and if new projects can be started – if it takes a team weeks to process every transaction that is received, they won’t be able to manage an increased workload associated with a new acquisition.
KPI #3: Time
F&A teams already understand how long their month-end close takes, but constantly measuring the time it takes to close across the Office of Finance is still critical when assessing organizational health and growth. Teams can better understand where investing in new solutions, such as financial close software, can lower the time to close, which enables teams to focus on other tasks.
KPI #4: Quality
When tracking the quality of your month-end close, the previous KPIs should be considered. Through understanding the risks, costs, and time incurred throughout the close, F&A teams get a holistic view of their operations. An integral part of assessing the quality is measuring the accuracy of the reconciliation process. If reconciliations are sent back or rechecked, the time to close is increased – lowering quality and accuracy.
KPIs allow for a unique snapshot of a business at any given time.
Financial close KPIs help teams better understand their performance and opportunities for growth, while also providing an accurate picture of organizational operations. KPIs are versatile – they can cover a range of departments, not just the Office of Finance, and serve as a foundation to help build out organizational goals and work towards business success.
To gain a deeper perspective and an in-depth analysis of financial close KPIs, download our eBook.
Written by: Mikayla Jordan