KPI #4: Accounts Receivable Turnover, in Days

Accounts receivable (A/R) may be one of the most important line items on your company balance sheet, and being able to easily translate this figure into a readable metric ensures you are receiving timely payments from satisfied clients. While this indicator is generally measured annually (also known as a ‘collection period’), your financial dashboard can be customized to display this more frequently (e.g. quarterly or monthly), especially if your company is in a high growth phase and has investors or other stakeholders to answer to.

You can also look at historical performance, and explore which quarters in the previous year(s) had the lowest number of A/R days. This extra level of analysis will enable your company to determine best practices and maintain a more consistent conversion of your A/R, thereby maintaining annual revenue growth and net profit margin.

 

A/R Turnover: Google vs. LinkedIn

Company 2014 Q4 A/R Turnover 2015 Q4 A/R Turnover
Google 49 days 51 days
LinkedIn 59 days 56 days

 

KPI #5: Cash (and Equivalents) as a % of Assets

Maybe you’ve heard the term “liquid” to describe your company’s asset portfolio and are wondering precisely what this concept refers to. Put in simple terms, this KPI represents your company's ability to meet its short-term debt obligations (e.g. paying back suppliers or creditors). The more cash a company has on hand, the greater the potential overall to remain flexible and innovative, as these assets can be invested into R&D, new equipment or the latest in IT infrastructure. However, it is important to set a target percentage range for this KPI, ensuring that you always have a certain amount of cash on hand in the event any unforeseen business issues arise.

 

Cash as a % of Assets: Netflix vs. Amazon

Company 2014 2015
Netflix 21.50% 17.70%
Amazon 33.30% 24.30%

 

 

KPI #6: Return on Equity (ROE)

If your company is publicly traded, or is backed by venture capital or private equity investors, ROE is a valuable indicator to track on a quarterly and annual basis. The primary idea behind this KPI is to view how much your company earns as a percentage of the amount investors have put up. Most likely, your investors expect a certain return on their investment, and want to see that your company is generating a higher ROE than they could get by putting their money into the bank or another more conservative investment strategy.

At the same however, companies like Amazon have had no ROE for many years, and have just begun to generate profits to appease shareholders. In many cases for technology companies in particular, shareholders are willing to stick with a company that is not making profits as long as there is immense potential for doing so down the road. Clearly with Amazon, the sky’s the limit, yet the stock price is equally astronomical.

 

Return on Equity: Netflix vs. Amazon

Company Q4 2015 Q1 2016
Netflix 6.02% 5.94%
Amazon 5.03% 9.22%

 

Optimizing your Financial KPI Strategy

We recommend that you consult with an expert prior to finalizing the primary financial KPIs you wish to track. Our team at Nano Blue can assist you in this process, and also conceptualize how all relevant KPIs could be displayed on the first screen of your customized dashboard. To setup an appointment to speak with a consultant, please email the team at Nano Blue and we will follow up right away.