Regardless of your industry or strategy, some financial indicators are essential: you must track key figures like Gross Margin, EBITDA, Working Capital, Cash Flow, Return on Investment (ROI), Debt-to-Equity Ratio… But there’s more to it: tracking the right financial metrics could be the difference between informed decision-making and wasted effort. 

So, how do you know which KPIs you should really focus on?

Step 1: Tailor KPIs to Your Industry 

After identifying general KPIs, it’s important to get more specific. Each industry has its own key metrics. For example, Retail companies focus on Inventory days and Working Capital turnover: they want to know how fast stock moves and how well they’re using their available capital; Manufacturing companies track Cost of Goods Sold (COGS) and Capital expenditure as a percentage of revenue to manage production costs; A services company would monitor Revenue per employee and Utilization rate (billable hours vs. total working hours). 

⏩ Understanding which KPIs matter in your industry gives you a clearer view of how your company is performing compared to your competitors.

Step 2: Align with the Company Strategy 

Next, think about your company’s goals. Are you focused on growth, or is cutting costs the priority? The KPIs you track should reflect these goals. You’re in growth mode? monitor Revenue growth, Market share, and CapEx (because investing in expansion is key); your focus is on cost-cutting? Then you could track Cost-to-Revenue ratio, Working Capital efficiency, and overhead as a % of revenue; As for Innovative companies, they will monitor their R&D spend and the ROI on their projects.  

⏩ KPIs should measure how well your company’s strategy is being executed.

Step 3: Adapt KPIs to your Audience 

As CFO, you provide financial information to different stakeholders. But not everyone needs the same KPIs: the CEO needs big-picture KPIs like Revenue Growth and EBITDA, the Sales Manager will probably be more interested in Revenue per Client, Gross Margin by Product Line, and yourself, as CFO, will focus on financial performance: Liquidity Ratios, Return on Equity (ROE), and Working Capital Efficiency.  

⏩ Tailoring KPIs to each role ensures everyone focuses on the metrics that matter most to them. 

A tip? Think about using tools like Power BI, to provide dashboards that allow users to break down data by department or product line

Step 4: Address your own Finance Operations Challenges 

As a CFO, you lead finance operations, your own “production department.” That is why you need to track its performance. For example, if your accounts payable team is slow in processing payments and suppliers are complaining, you should monitor the Days Payable Outstanding (DPO), as well as Invoice processing time or number of invoices processed by employee.  

⏩ Tracking Performance KPI motivate teams to fix inefficiencies.

Step 5: Think about KPI’s Production 

KPIs are only as good as the data behind them. If your data is inaccurate or inconsistent, you are wasting everybody’s time. Review your processes and invest in tools that automate data collection. KPIs should be easy to calculate and access. If your team spends days compiling data, the measure might not be worth it. Sometimes, it is better to choose a simpler indicator that is easier to track. Avoid information overload, there are hundreds of ratios you can track, but it can become overwhelming. Focus on the metrics that truly drive performance, and don’t be afraid to stop tracking what is not useful.

⏩ Review your KPIs regularly with their recipient

To conclude: You are now ready to start! Align those KPi’s with your company’s strategy, industry, and specific challenges; Tailor indicators to the right people, review them often, and ensure the data is solid. With the right metrics in place, you will be able to make better decisions, faster, and keep your company’s financial health on track.

Need some hands conducting the assessment? At Penon Partners, we specialize in helping finance leaders choose the right KPIs that align with their goals, industry demands, and operational challenges. Whether you are dealing with accounts payable issues, cash flow challenges, or aligning metrics with strategy, we are here to help you find practical solutions. Schedule a call with us today.