January 31, 2024

A Comprehensive Guide to Key Performance Indicators for CFOs


Here’s 23 KPIs CFOs should track in order to gain a full overview of their business’ financial health.

Miranda Gabbott

To steer a company to financial success, CFOs must keep tabs on a broad selection of KPIs. Without regularly checking key metrics, your fiscal strategy will be reactive rather than proactive—and you may have to answer investors’ difficult questions with an embarrassing “I don’t know.” 

The following 23 KPIs will give you a realistic appraisal of your company’s financial health, and allow you to report this accurately to others.  

This selection will be most relevant to CFOs at tech companies of between 20 and 200 employees, but anyone who manages a finance team will find it useful. 

23 KPIs a CFO Should Track 

Here are 23 metrics you should consider tracking and a refresher on what each one entails.  Most teams use digital or business intelligence dashboards to calculate these numbers, but we’ve provided the formulas for illustrative purposes. 

Financial Health KPIs

1. Revenue Growth Rate 

Revenue growth rate measures your business’ month-on-month increase in income as a percentage. It’s a solid indicator of how quickly your business is growing: whether your finance strategy is paying off on the highest level. For this reason, it’s particularly important for startups. 

When calculating your revenue growth rate, you must specify the time frame—such as per quarter or per year—and compare it to your growth rate in the previous period. Remember: you’re calculating revenue, not profits, so don’t factor in expenses. 

The formula
:  [(Current period income – Previous period income) /  Previous period income ] x 100%

2. Gross Profit Margin

Your gross profit margin is the proportion of money your company keeps after covering the  costs of making its product or service (also known as COGS, cost of goods sold). Gross profit margin is expressed as a percentage of total revenue. 

The formula: [Net Sales – Cost of Goods Sold (COGS)] / Net Sales

3. Net Profit Margin 

Your net profit margin measures the % of total income that remains after you’ve subtracted the costs of goods sold (COGS) plus other operating expenses. The key difference here is that net profit is more definitive since it accounts for the full picture of running your business. Of the two KPIs, investors and analysts are likely to scrutinize your net profit margin more closely. 

The formula: Net Profit  ⁄  Total Revenue x 100

4. Operational Cash Flow

Operational cash flow, also known as operating cash flow, measures the amount of money a company brings in from its day-to-day business activities—whether that be goods sold, or software services provided. 

Unlike a company’s net income, operating cash flow doesn’t include any cash brought in from investments. This metric is a key indicator of the profitability of a business, especially in the case of larger companies. 

The formula
: Total cash received for sales – Cash paid for operating expenses

5. Working Capital Ratio

Working capital ratio measures your company’s ability to handle expenses and short-term debts with its current assets. When a business’ working capital ratio is above 1, it can, in theory, pay off its liabilities with its existing assets. If it’s below 1, the business would need to borrow if it had to pay all its bills tomorrow. It’s worth tracking working capital ratio, but keep in mind that this metric is heavily influenced by temporary factors. For example, fast-growing startups might have an alarmingly low working capital ratio—but choose to make this temporary gamble to be in a stronger position long-term. 

The formula
: Current assets / Current liabilities 

6. Quick Ratio

The Quick Ratio (also known as the Acid Test or Liquidity ratio) indicates whether a company can pay its short-term obligations with its most liquid assets. That is to say, whether it can pay its liabilities with the money easily to hand from things like cash, accounts receivable, and marketable securities (financial assets that can be easily bought and sold such as stocks, and bonds). 

Unlike the Working Capital Ratio, the Quick Ratio only takes into account assets that a company could easily cash in: it asks, would your business really be okay if all your debts were called in tomorrow? It is a more conservative measure of liquidity. 

The formula: [Cash + Marketable securities + Accounts receivable] / Current liabilities 

7. Debt-to-Equity Ratio

Businesses at a larger stage of growth should track their debt-to-equity ratio (D/E ratio). This measure shows how much debt a company has compared to its shareholder equity. It shows how much of a company’s operations are financed with debt rather than their own assets, and is a solid indicator of a business’s financial leverage. 

As a rule of thumb, healthy D/E ratios hover between 1 to 1.5, but norms vary by industry.

The formula
:  Total liabilities / Total shareholders’ equity 

Planning and Budgeting KPIs

8. Budget Variance

Budget variance does what it says on the tin: it’s a measure of how far your business’ actual spending varied from the budget you had set. Budget variance records both underspending and overspending. Naturally, favorable budget variance indicates that your company either had lower running costs or made higher revenue than expected. Unfavorable budget variance indicates that your company overspent, or underdelivered compared to financial plans. However, extreme variance either way can be unfavorable—estimating your budget accurately is a key pillar of financial planning.

Tracking your budget variance can give an indication of how accurate your cost forecasting was, and help you allocate budgets more effectively going forward.

Pro tip: For companies in the tech space, one of the most common reasons for budget variance is unpredictable software costs. A software management platform like Cledara allows you to gain visibility over future tech spend and—better still—cap the spend on individual subscriptions so there are no surprises at month-end. 

The formula:
Actual sales or expenditures / Budgeted sales or expenditures

9. Forecast Accuracy

Forecast accuracy, as the name suggests, measures how close your previous predictions for sales figures came to the actual outcome. It is usually expressed as a percentage. Since sales forecasts are an essential piece of the financial planning puzzle, it’s essential to build a picture of how accurate your forecasts tend to be. 

The formula
:  Mean Percentage Error = ((Actual – Forecast) / Actual) x 100

10. Net burn rate

Your net burn describes the rate at which your business uses up its money, and is most commonly tracked on a month-by-month basis. It’s an especially important metric for startups to track since many don’t generate a positive net income in their first years. Investors, therefore, usually provide funding based on a company’s burn rate. 

Once a company has calculated its net burn, it understands how long the business can run without bringing in extra revenue or funding.

The formula: Cash / Monthly operating losses 

11. Burn Multiple

Burn multiple reflects how much revenue you generate for every dollar you “burn” or spend. To understand your burn multiple, you must first calculate your net burn for the year, then divide it by your annual recurring revenue (ARR)—the sum of all your income over the next twelve months.

When the burn multiple goes below zero, the company is making money. However, startups may have a burn multiple of more than 1. A company with a burn multiple of 4, for example, is spending $4 for every $1 gained. 

Companies with high burn rates do sometimes manage to scale successfully—take Uber, for example—but in our current economic downturn, companies with a high burn rate are likely to struggle with fundraising. 

The formula: Net burn / Net annual recurring revenue

12. Cash runway 

Cash runway, an essential KPI for startups, measures how long your business can operate if it keeps spending its money at the rate it currently does—without raising additional funding. In other words, it reflects how long you can operate at a loss. 

To calculate your cash runway, you divide your burn rate by your total cash. The word “cash” typically refers to three things —company cash (the money which covers day-to-day operational costs), team cash (the money behind payroll), and founder cash (the money in the founder’s own private reserves). Typically, most businesses only use the first of these, company cash, when calculating cash runway. 

By measuring cash runway over time, CFOs can make a smart decision on what margins feel comfortable, and calculate budgets accordingly.

The formula: Net Burn Rate = Cash / Monthly Operating Losses

Operational Efficiency KPIs

13. Customer Acquisition Cost (CAC)

Although customer acquisition cost (CAC) is a metric typically owned by sales and marketing teams, it’s useful for CFOs to stay across this figure too. As the name suggests, CAC is the best approximation of how much it costs your business to acquire a new customer. To calculate it, you should take into account the payroll of your sales and marketing team as well as advertising and marketing costs.

It’s vital to keep an eye on your CAC, to make sure that your business is growing sustainably, rather than overspending on building pipeline.  

The formula: Amount spent on sales & marketing / Number of customers 

14. Churn Rate

Churn rate is a metric that your marketing and product teams will typically keep the closest tabs on—but again, a useful one for CFOs to check in with. Churn measures the percentage of customers who stop doing business with you in a given period. It’s a particularly valuable metric for SaaS companies, whose business model relies on rolling subscriptions. 

Your churn rate is a solid indication of how well you’re meeting your customers’ needs and inspiring loyalty. It can also help you track buying patterns, and help you calculate the average lifetime value of a customer. 

The formula: (Total lost customers / Total number of customers in the period) x 100

15. Customer lifetime value (CLV) 

Customer lifetime value (CLV) represents the total net income a company expects to generate throughout a customer, and throughout the client-vendor relationship. It takes into account the initial purchase, any repeat purchases, and the average duration of the relationship. CLV is calculated as an average figure. 

A high CLV is, naturally, desirable—it reflects good customer loyalty and reduced customer acquisition costs. 

The formula: Customer value x Average customer lifespan

16. Monthly Recurring Revenue (MRR)

Monthly recurring revenue (MRR) is most relevant for subscription-based businesses, such as those in the SaaS industry. Monthly recurring revenue measures the predictable income that a company can expect to take every month. Calculating this figure helps CFOs forecast future revenue and make strategic decisions. 

The formula: Number of customers x Average monthly revenue per customer 

17. Cost of goods sold (CoGS)

Cost of goods sold
represents the amount your business spends directly producing its product. It reflects costs of raw materials and labor, but excludes indirect expenses such as costs from sales, marketing, operations, and distribution. When calculating this figure, you must exclude the costs of goods that you’ve created but which remain, as yet, unsold. 

Any CFO must monitor the CoGS, since subtracting this figure from your company’s revenue allows you to determine gross profit. Companies that don’t make a product, such as retailers, may calculate cost of sales in place of this KPI. 

The formula:
Starting inventory + Purchases − Ending inventory = Cost of goods sold 

18. Gross profit

Gross profit is an essential line on any company’s income statement. It reflects the amount of profit a company is left with, subtracting the cost of producing and selling its product—the Cost of Goods Sold. Once again, operational costs are excluded from the calculation. 

The formula: Net sales – CoGS 

19. Operating profit

An operating profit, sometimes known as earnings before interest and tax (EBIT),  is a company’s total earnings from its core business activities, before paying taxes. If your business has an operating profit, you are generating more money than you’re spending to keep the lights on. 

In its simplest form, operating profit is gross profit minus operating expenses. However, most accountants factor in depreciation—the cost of wear and tear on equipment, which you’ll eventually have to replace, and amortization—any interest payments you may receive.  

The formula: Gross profit – Operating expenses – Depreciation – Amortization 

Finance Team Efficiency KPIs 

20. Payment Error Rate

Your payment error rate (PERM) is a measure of how accurate your finance department’s operations are. This includes both sending payments to suppliers and issuing invoices for payments you’re due. Accounting mistakes can be expensive, so it’s wise to track this KPI for internal quality control. 

The formula:
Number of errors / Transactions processed

21. Days to close 

Days to close tracks the number of days it takes your team to balance the accounts to prepare a statement or report at the end of an accounting period. Most businesses close their books at the end of each month, which takes between a couple of days to a week and a half. 

There’s no formula necessary for this one—just keep a log of how long this process takes the team every month.   

Taking too long to close the books? Using a software management tool can save the average finance team
two days per month on this task. 

22. Accounts Payable Turnover

Accounts payable turnover reflects the rate at which a company pays its suppliers. It’s considered best to have a lower figure for your accounts payable turnover since this indicates good short-term liquidity. However, too low a figure may indicate that you’re playing it too safe and missing opportunities to invest. 

Investors typically look to accounts payable turnover as a measure of short-term liquidity. 

The formula:
Total purchases / ((Beginning accounts payable + End accounts payable) / 2) 

23. Accounts Receivable Turnover

Accounts receivable turnover measures how efficiently a company collects the money it’s due from clients or customers. It reflects the number of times in a certain period, such as a year or a month, a company’s IOUs are turned into cash. A high ratio is desirable since a low ratio could indicate inefficient processes. 

The formula:
Net credit sales / Average accounts receivable 

Managing the metrics that matter 

Most CFOs will not need to track all 23 KPIs on this list. To get a clear picture of your business’s financial health without falling into analysis paralysis, the secret is to choose relevant metrics to track and to measure them accurately.  

The best performance indicators to pick will depend on the nature of your business. Topics like cash runway are more relevant for startups; metrics like monthly recurring revenue and churn rate will be pertinent for subscription-based businesses. 

Whichever metrics you choose, finding accurate measurements can be an issue. Many businesses, for example, struggle to accurately calculate how much they spend on software, or forecast how much this spend will be in the upcoming months. For this, a software management platform like Cledara, which shows you all your software costs in a central dashboard, can make all the difference.

How is CFO performance measured?

CFO’s are typically assessed by the financial performance of the company they’re working with, and on their performance as a professional. 

A company’s fiscal performance is typically measured through indicators like revenue growth, profit margins, and cash flow. A CFO’s individual contribution to these is appraised by looking at things like their strategic input, risk management skills, and team leadership.

How many KPIs should a CFO track?

The number of KPIs a CFO should track varies depending on the size and nature of the business at hand. Most financial officers choose around 5-10 key performance indicators (KPIs) to report on and track in depth, and then dip in and out of looking at connected metrics. 

How should a CFO track their KPIs?

Most CFOs track their core KPIs using a dashboard which automatically pulls important financial data from the rest of their tech stack. They may also use spreadsheets, and financial reporting tools. 



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Miranda Gabbott

Miranda is a writer and content marketer with over five years’ experience writing about software, predominantly for SaaS companies such as Hotjar, Typeform and Preply. She’s interested in ethical and cultural considerations around new technologies and is currently studying for an MA in Design for Responsible AI.

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