The greatest cash flow indicators and KPIs provide information about the financial health and potential of your organization. Additionally, some of these measures may be calculated by investors using data from financial statements.
As a result, investors can better comprehend a company’s finances thanks to many of these data.
KPIs provide essential decision-making information for business leaders and stakeholders. For instance, they may help determine whether to develop new product lines or whether to make adjustments to internal procedures like accounts receivable.
Table of Contents
10 Best CASH KPIs
Here are the top 10 cash KPIs you need to learn.
1. Cash Burn Rate
Description: Net Cash spent by a company in a specific time frame (usually monthly or normalized to a year).
Formula: Cash Spent (monthly average) – Cash Received (monthly average)
2. Cash KPI Average Days Delinquent (ADD)
Description: Measures effectiveness of collection efforts. Often used at the client level to compare with the others.
Formula: Days Sales Outstanding (DSO) – Best Possible Days Sales Outstanding (BPDSO)
3. Operating Cash Flow (OCF)
Description: Money generated by daily operations.
Formula: Net Income + Non-Cash Expenses – Increase in Working Capital
4. Free Cash Flow (FCF)
Description: Expands on the OCF concept by also excluding interest payments and including asset purchases.
Formula: OCF – Interest Payments + Asset Purchase
5. Cash KPIs Overdue Ratio
Description: Measures your effectiveness of collecting cash and the quality of your receivables.
Formula: Overdues / Total Receivables
6. Days of Inventory Outstanding (DIO)
Description: Average number of days that a company holds inventory before turning it into sales.
Formula: Average Inventory / Yearly Cost Of Goods Sold (COGS) x 365 days
7. Days Sales Outstanding (DSO)
Description: Average number of days that it takes a company to collect payment for a sale.
Formula: Average Account Receivables / Annual Sales x 365 days
8. Cash KPIs Days Payables Outstanding (DPO)
Description: Average number of days that it takes a company to pay its suppliers.
Formula: Average Account Payables / Yearly Cost Of Goods Sold (COGS) x 365 days
9. Cash Conversion Cycle (CCC)
Description: Days to convert inventory into cash flows from sales
Formula: DIO+DSO−DPO
10. Cash Reserves in Days
Description: Measures of how long your organization could survive if cash dried up tomorrow.
Formula: Cash Reserves / Average Daily Expenses
The table below shows the summarized list of CASH KPIs you need to learn.
The Bottom Line – Cash KPIs Are A Crucial Indicator
The KPIs you select to monitor will depend on your sector, business, and even the responsibilities you play within your organization. Executives, for instance, could be more engaged in medium- and long-term objectives than line managers, who can be more concerned with immediate success indicators.
However, there are certain fundamental principles to follow while choosing your goals.
Therefore, try to be explicit in your goals, realistic in your expectations, and mindful of the fact that not all KPIs will apply to every employee in the company.
Furthermore, a key business strategy that has a significant impact on growth and financial health is setting proper company objectives that teams can strive toward.
Also, which other KPIs do you think should be considered?
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