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KPIs for the Accounting Department & Finance Department

scott graves's Profile

KPIs For Accounting And Finance Department

We are in the process of implementing Performance Boards in the Finance / Accounting department to document, track and drive performance.  Initially, we discussed tracking on a daily basis: # invoices processed (payables), # errors (payables), $ receivables collected, # of collection calls (credit & collections), # of correcting journal entries made (accounting), and attainment of month-end close calendar (entire department).  What other KPI for accounting department (and finance) and do other company's track to drive continuous improvement within their finance / accounting departments?


Patrick Duff
Title: Principal
Company: Duff & Associates, LLC
(Principal, Duff & Associates, LLC) |

I have struggled with the same issue - what KPI for Accounting department make sense? A KPI should do two things -- (1) inform management and employees about the efficient operation of the company/department and (2) ensure employee behavior is aligned with the company goals.
If your department is having issues with the work flow for AP or AR then your choice of metrics may make sense. However, you want to make sure that tracking the KPIs is going to lead to an improved operation. Selecting the target for the KPI is critical as well. If it is too easy or too much of a stretch it loses its value.
We opted for measuring results only through AP and AR aging -- setting the acceptable levels and then managing to them. We stayed away from the targeting of the number of AJEs, since many of the adjustments are caused by errors in other parts of the organization that Accounting needs to fix. I would not want to have an accountant pass on an AJE if they were afraid it would hurt their KPI. We did track days to close and the completion the closing calendar on time.

The overarching concern of a KPI should be to balance the measure against the benefits of having the measure in place. Keep the KPI target/goal realistic. And, be careful of unintended negative consequences.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Scott, you might want to take a look at this whitepaper...

"A Modern CFO’s Guide to the Right KPIs"

I hope that all helps!

Best... Sarah

Topic Expert
Randy Miller
Title: Partner
Company: CFO Edge
(Partner, CFO Edge) |

It is a tough issue. Measuring workflow is difficult because depending on the business the natural cycle may be one of ebbs and flows; and we all know that month-end is always a crunch time. On the A/R side, you can measure days sales outstanding or average receivables aging. A/P can also lend itself to an average aging measurement, but it the business cash flow is not steady, then that measurement can be influenced by factors beyond the control of the department.

In the end, the most important KPIs for the Accounting department are: accurate financials and time-to-close.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

An overriding concern I have with many KPI's is the high tech vs. high touch nature in which they are used.

So person A does 10 invoices an hr and person B does 75, whose more efficient? Maybe person A who has complex, multi-line item invoices vs. person B who has single line invoices.

KPI's need to be made relational information, not just data points.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

Since most of the activities our finance group is tied to efficiency we use things like transactions processed per hour, manual entries per close period (love driving this down). Since we close in two days, we push to get entries in on the last day of the period.

When I took over an administrative processing center in the '90's we measured our backlog of orders, which was a big issue. We put in KPI charts which measured problem transactions processed by person and posted the results. The winner each week got a free dinner out. I have never seen backlogged processing get done so quickly. I digressed a bit, but I would use the KPI's to get to a specific goal rather than just having a "general goal."

Topic Expert
Brenda Morris
Title: Board of Directors, Audit Committee Chai..
Company: Boot Barn
(Board of Directors, Audit Committee Chair, Boot Barn) |

I love the idea of charts and weekly incentives to the team. Would you be willing to share samples of your KPI charts? I'd love to have my accounting team implement these. Thanks for the great information! Brenda

Anders Liu-Lindberg
Title: Regional Finance Business Partner
Company: Maersk Line Northern Europe
LinkedIn Profile
(Regional Finance Business Partner, Maersk Line Northern Europe) |

Just received the scorecard for my finance department (we are a small affiliate to overall scorecard is received from HQ Finance) and some of the main topics are:

Process optimization:
- Bring down ICP plugs
- Sharing of best practices
- Faster invoicing

Faster close:
- Average reporting (to HQ) day
- Number of corrections after closing

Roberta Steele
Title: Sr. Treasury Manager
Company: SI Group, Inc.
(Sr. Treasury Manager, SI Group, Inc.) |

While I am not discounting the importance of tracking DSO as a KPI, in my experience it is frequently beyond the control of an A/R clerk to be able to significantly impact this figure (assuming collections is already doing a decent job). Does your collections staff set all customer payment terms and control the swings in monthly sales revenue? What I believe holds the Collections Department more accountable is % A/R Past Due. It is easily tracked, trends can be acted on immediately, and results can be seem in the next reporting cycle.

scott graves
Title: CFO
Company: Armstrong Teasdale LLC
(CFO, Armstrong Teasdale LLC) |

The responses have been great. To address a few comments that came up, let me clarify further: my goals for implementing KPI boards for finance are two-fold:
(1) -Drive improvement in the key metrics that are important to the business (e.g. DSO, past due receivables, missed early pay discounts, days to close, etc. and
(2) -Identify process issues that need to be fixed (number of adjusting journal entries, number of credit memos issued, days late to close, etc.). By addressing these issues by finding and correcting root cause, which is often outside of the finance department, we improve the overall efficiency of the department and the business.
That's why I am searching for other metrics that are important to capture to drive business results and process improvements.

Claudia Juarez
Title: Finance and Admin. Manager
Company: Heifer International
(Finance and Admin. Manager, Heifer International) |

Has anyone has experience implementing KPIs for a not-for-profit organization? where we do not have sales or receivables?

(Controller) |

Whichever measures you choose, make sure the data are easily collected without a lot of manual effort. As a non-profit CFO, I was asked to track a number of measures that our MAS90 accounting software did not readily provide and felt trapped by the competing needs of driving continuous improvement (critical) and frequently reporting on various metrics (time intensive non-value-added activity).

Pamela Wise
Title: Director/General Accounting
Company: The E.W. Scripps Company
(Director/General Accounting, The E.W. Scripps Company) |

We are currently in the middle of a F&A Transformation project where a consultant provided us KPIs we should track. Some we have started on, but others are still a work in progress. The KPIs include: 1) GL Close time, 2) number of entries processed by the Finance team (vs Accounting), 3) number of reclass/correcting entries, 4) number of automatic entries vs. manual, 5) number of account reconciliations to be performed manually (vs a reconciliation tool).
They are others on our list, but some may just pertain to our company so I did not list them.

C. Benjamin Cornforth
Title: Director of Customer Success
Company: Trintech
(Director of Customer Success, Trintech) |

Pamela... this is an excellent list. Thanks for sharing.

Gerry Anderson
Title: President and Founder
Company: Logicon Solutions
LinkedIn Profile
(President and Founder, Logicon Solutions) |

Your KPI'ls should be aligned to what is important and to what is seen as valuable to your organization. For instance, you might want to track data quality by number of reclass entries per month. You might want to track timeliness of data to accounting by number of accruals. When we put in KPI's for clients, we recommend that you pick two or three per process and ones that allow everyone to see the efficiency, effectiveness and value of your team.
Email me if you have more questions.

Carrie Roesner
Title: Controller and VP
Company: Centro
(Controller and VP, Centro) |

We began formally tracking metrics in our Accounting teams this past year and provide our CFO a monthly report on how we're doing including commentary on highlights and issues and how we're addressing them. We're a relatively young company and are always looking for ways to improve our current processes. By tracking certain areas, we definitely shed light on some areas that needed attention and crafted our annual goals around these areas so we've found this to be a very valuable process. We're also exploring how to best communicate some of the issues to other teams (e.g. invoice revisions due to errors from sales or operations teams). We look at the following:

Time to close the books
Time to issue management reports
Prior period adjustments
One-off items
How DSO and DPO are trending against each other
Personnel costs of AR and AP as % of net revenue (since these teams are part of the sales cycle)

% balance over 90 days (by AR person and sales region)
# of invoices + credit memos processed
# of revised invoices processed by reason
% of invoices produced and sent on time (by person)

% of balance over 90 days
% of unbilled payables
% of unapplied payables
# of manual adjustments applied
# of tickets received and closed (vendor inquiries)

Select a few that you find would be meaningful to your teams and company and then add to or revise them once you have a feeling for what the data is telling you and what areas you need to explore further. Good luck!

Debra Johnson
Title: A/P Manager
Company: Verizon
(A/P Manager, Verizon) |

I have tracked the first three on the Payables list. It was necessary to track A/P aging and unbilled payables as it identified how we did in resolving vendor invoices and requesting vendor credit/rebills.

Steve Peterson
Title: Consultant
Company: Consultant
(Consultant, Consultant) |

How about the following in addition to above to measure efficiency:
* Budgeted time on projects vs actual
* Dollars saved from employee suggestions
* Accounting system downtime (during normal biz hours)
* Billing accuracy
* Managers time accessing general ledger
* Manual transactions vs automated transactions
* Number of customer calls in a test week (3rd week of each month)

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

Obviously, this topic has struck a nerve--which is good.

In addition to some of the KPI's mentioned above which went into my various teams' balanced scorecard, we collected:

the collection efficiency ratio (% collected versus available),
net losses on AR (P/(L)) measure versus target, adjusted annually for new accounts and economic conditions,
close stats (on time, measured intra day),
bank reconciliations with a goal to have nothing in suspense--applies to all GL accounts,
process improvements measured in hours (yes, periodically, I had my teams write time; those coming from big 4 are used to this practice).

Charles Schrock
Title: SVP
Company: Inland Bank and Trust
(SVP, Inland Bank and Trust) |

Key Performance Indicators flow from departmental objectives. Since no department can take the time to measure (and spend management time monitoring) everything that they do, it's important to know what's most important for YOUR accounting department and spend your limited time measuring and monitoring those things. The fact that other people can identify statistics that could be useful is not the point; you must decide on the issues that will be useful in your specific circumstances.

So, if you haven't already, have an open discussion with your boss about what (s)he thinks is important. My experience is that some surprises typically surface from such a discussion. Once you have agreement about your top objectives, the statistics that you will choose to monitor will flow easily from that discussion.

dan rowley
Title: VP, Finance
Company: Sendori
(VP, Finance, Sendori) |

Definitely DSO. Nearly all companies, universally, care about cash flows and the finance/AR team will directly impact this metric.

Charles Schrock
Title: SVP
Company: Inland Bank and Trust
(SVP, Inland Bank and Trust) |

The sole purpose of a KPI is to allow management to know which of its important objectives are on track and which are not. The idea is to focus on objectives, not data points. Develop KPIs that provide a reasonable indication of whether you're accomplishing what you want. This will not be the same from one organization to the next. It's also possible that you may need multiple KPIs to really answer the question of whether the objective is on track or not.

faraja massawe
Title: managing director
Company: imperial construction ltd
(managing director, imperial construction ltd) |

i can not agree more with this

Topic Expert
Lee Andrews
Title: P/T CFO, Business Consultant
Company: Pacific Bag, Inc./Other Clients
(P/T CFO, Business Consultant, Pacific Bag, Inc./Other Clients) |

Tough one -- who is going to measure the KPI's in Accounting, but accounting people/CFO? It could become the fox watching the henhouse. While the accounting dept can more easily measure the performance of sales, factory floor performance, hours worked, QC stats, etc. -- how many people can come in and independently measure what are correcting journal entries, payables errors, etc. I think it would be tough to implement and take up a lot of unnecessary time for little improved benefit. The Controller/CFO should know how well the accounting team is performing, how fast they close, DSO AR stats, reconciliation diligence, etc. just by managing the department. Who else in most companies cares about accounting department KPI's (not even most CEO's)?

faraja massawe
Title: managing director
Company: imperial construction ltd
(managing director, imperial construction ltd) |

Well mentioned the cfo is the right person to set the KPI with the much as the accounting department records history and keeps the archives in tact so does the books of history should constantly improve and tell exactly what the future hold.

Greg Mills
Title: Former SVP
Company: Free Agent
(Former SVP, Free Agent) |

Many people have provided you with many good, detailed, KPIs. You stated that you want to look at daily numbers. Are you already looking at monthly and quarterly numbers? If not, I would start there and work top-down instead of bottom up.

Early on in the process I would investigate "touch points" between Finance and other departments. If other departments either have pain points due to Finance, or are aware of pain points, this information can be eye-opening. Also, I've seen situations where Finance was either asking for information it didn't need, or providing information that wasn't used. Removing actions and costs that make no difference is a great place to start.

The other type of actions that this can help identify are those that are requested multiple times before being resolved. You can then begin measuring these, once they're identified to begin a cost-benefit analysis.

I don't know the culture of your company, the level or nature of any issues you may or may not have, and this makes a big difference in how you manage KPIs. If most processes are running smoothly, then looking at some of the detailed KPIs people have mentioned make a lot of sense. If you either have, or suspect, bigger issues, then only you know the best place(s) to begin looking.

Deanna Miller
Title: Chief Financial Officer
Company: Professional Plumbing Group
(Chief Financial Officer, Professional Plumbing Group) |

Hi Scott, for the objective of metrics that are important to the business, one thing that I have not seen mentioned yet is forecasting accuracy. Processing metrics - days to close, error free transaction processing, # of lines per processor - are good to highlight and address number 2. However, one business objective that gets to the heart of business decision making is forecasting accuracy. Like other business tracking metrics - DSO, DPO inventory turns, budget variances, standard cost variances - forecast accuracy is not entirely dependent on the actions of finance. However, specifically tracking how accurate elements of the forecast are for the current month, the quarter, etc can help pin point the controllable elements that the FP&A team can focus on to improve accuracy.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

From my perspective, the key is to align the KPI with the overall organizational goals of the company. Since accounting is part of the support structure, you want to encourage team work. First, I always make the case for the finance organization to be on the same incentive program as the operating groups. Then, drive KPIs from that. Invoice accuracy that minimizes DSO could be one, assuming the company wants to maximize cash flow. Developing accurate and timely information to drive action such as slow moving and obsolete inventory. I struggle with the processing transactions goals as a number. How can you hold the accounts payable team responsible for a number of invoices paid if they don't control how many they receive? Instead, the AP clerk could participate in developing a cash outflow model that helps management determine borrowing needs. You can also encourage continuous learning like reading an article once a week about one of your customers.

Jim Hinkel
Title: CFO
Company: RyMed Technologies
LinkedIn Profile
(CFO, RyMed Technologies) |

I didn't have time to review all responses but wanted to share some that I've used in addition to AP and AR financial measures that included the "cleanliness" of the AP and AR (i.e. minimize the number of small unsettled discrepancies) as well as number of days to close (we had a 3-day close at the operations level of a major corporation), completion and accuracy of all balance sheet reconciliations, timeliness and accuracy of recurring internal organizational reports to name a few.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Jim -

I don't understand why cleanliness would be a much needed factor (KPI), unless the total amounts became material.

Not that the A/R or A/P department shouldn't be doing this function as a normal part of business... I would put this item in a managerial "audit" category as opposed to a KPI.


Steve Breitman
Title: President/CEO
Company: Mindful Business Solutions
(President/CEO, Mindful Business Solutions) |

The KPI's you mention are great if all you want to do is measure the sheer amount of work done. They don't do much if you're trying to understand the work quality or how the department is furthering the company vision.

I recommend that instead of viewing the accounting department as a production or cost center think of it as a service center. In what ways does it serve and support the other departments? How does it help the company solve problems (not just accounting problems)? If you can answer those questions then you're getting somewhere. You can devise a system for measuring and tracking accounting's contribution.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

To repeat a bit of what has been said before, we focused on KPI's that identified problems. And then we took it a step further.

One Example:
A/P had 30 transactions they could not complete (on Tuesday) and we identified what portion fell into one of several categories: No PO, No signed PO, Wrong Unit Price/Quantity (above 5% threshold), No Supplier Set-Up, Misc. This was done on a colored graph that tracked the issues over time. It is amazing how quickly certain items get cleared up when the purchasers realize the KPI's from accounting are actually reporting on them. It also provided additional color to the number of PO's processed in a given day - and what percentage did not get processed due to problems outside of our control.

We did the same thing with A/R. And then we had a general meet deadlines KPI which put everyone together with one goal. A solid team works hard and then stretches to assist teammates when they see help is needed to keep in the green with the KPIs.

Topic Expert
Jaime Campbell
Title: Chief Financial Officer
Company: Tier One Services, LLC
(Chief Financial Officer, Tier One Services, LLC) |

I agree wholeheartedly with Steve. The details proposed in the post and comments may be solid milestones to monitor, but I would emphasize accomplishments which directly impact the company's mission and give the entire Accounting / Finance team bragging rights companywide. The implications are significant.

For example, how about a KPI based on DSO but pertainng to the time value of the increased pace of collections? You'll need a baseline, of course. The result will be a phrase like, "Since 2013 the financial team has made the company an extra $520,000 through innovative collections."

How about the department's support of profitable initiatives? "In only 25 days from initial talks, we secured the capital to fund the XYZ project, which ultimately netted the company $3.4M and capturing an additional 7% of the market, and we saved $50,000 as compared to previous loans by negotiating a more favorable rate and making 100% of payments on time."

Candace Bailey
Title: Management Consultant
Company: Self Employed
(Management Consultant, Self Employed) |

My suggestions are in line with Patrick Duff-cost/benefit/goals. In addition, I would incorporate observation (both inside and outside the accounting department) and input to determine solutions that may increase performance and then monitor/change those solutions accordingly. Performance may then be measured and rewarded in terms of active participation in resolving problems and making improvements associated with meeting the departments objectives.

Sarah Nelms
Title: Global Director - FP&A
Company: Dice Holdings, Inc
(Global Director - FP&A, Dice Holdings, Inc) |

Keeping transactional accounting out of the mix I find that KPI's for FP&A are usually harder to measure. Granted there are some of the easier KPI’s such as forecasting accuracy, # of training sessions (trying to drive ownership in the business so conduct Finance for non-finance), timeliness of forecasts, budgets, etc. and various others but the largest value from a FP&A team is the ability to effectively business partner. Unfortunately I have not come up with any wonderful ways to measure this with numbers but rather anecdotally which causes bias in so many ways. I have tried measuring the # of times a report was interpreted incorrectly (to me this tells me if we are too “accounting/finance” focused and can’t understand the business), or an ad-hoc analysis didn’t deliver the intended result (potential communication issues or business acumen) and even the ability to resolve issues between departments where we have a place at the table but none truly paint a full picture. Is there anyone who measures a Global FP&A team with KPI’s?

Topic Expert
Vernon Reizman
Title: CFO
Company: RCM Industries, Inc.
(CFO, RCM Industries, Inc.) |

I would include a customer satisfaction measurement and graph it over time. Query key departments in the company/organization quarterly on whether you are meeting their needs.

Marcel Wiedenbrugge
Title: director
Company: WCMConsult
LinkedIn Profile
(director, WCMConsult) |

I haven't read all the comments, but I would at least take customer profitability as one of the key metrics. Ultimately, the success of a company boils down to the profits and losses that customers generate. Customer Based Accounting, may help you to attribute direct and indirect costs to customers. Also include the costs related to financial risk (credit risk and late payment risk). In short: focus on the long term bottom line. You may also check my book The Customer Profit Maxim.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Daily tracking seems excessive to me, you will spend all of your time explaining variations when people are sick or on vacation. I agree with the comments that service standards are probably better measures of success.

One final caution, setting too many "standards" can cause you to spend more time on data gathering and reduce efficiency to the detriment of service.

Anupam Sharma
Title: CFO
Company: ABCL

What relevance or significance would Finance & Accounts Department's initiatives, measures, targets would have in the concept of The Balanced Scorecard except for efficient and error free maintenance of Books of Accounts and uninterrupted fund flows?.

The role of Finance & Accounts Department in the whole concept of achievement of Organization's mission under The Balance Scorecard Tool would be of accumulation and measurement of financial information to a large extent.

Nanda K. Kuppusamy CPA,CMA,C..
Title: Analyst
Company: RU
(Analyst, RU) |

I would use the term KPI with reservation.
However, I would develop statistics along the lines of:-

Number of reconciliations
Number of Unreconciled items
Forecasting accuracy by ( Bank/AR/AP) %
Number of account coding corrections

Number of training hours
Number of PD Hours
Actual staff hours

Number of interdepartmental replies(non routine)
Number of external interactions (Non AR/Non AP related)
Number & $$$'s of unresolved items
Number & $$$'s of unexplained variances
Number & $$$'s of late fees Or penalties paid

AP/AR related indicators

Number of unplanned cheque runs
Number of stale dated cheques

Observe the trend for the Finance Dept. on month by Month basis and look for unusual high's/low's which should raise red flags.


Steve Peterson
Title: Consultant
Company: Consultant
(Consultant, Consultant) | recently posted the following:
Cycle time (days to close/days to report)
FTE Headcount
Staff satisfaction
Staff Turnover
Volume and/or value of post close AJEs
Process cost relative to revenue
Overtime hours per FTE
Training hours per FTE

Michelle Rogers
Title: CEO
Company: Virtually There CFO Services
(CEO, Virtually There CFO Services) |

Keeping it simple is always best. Generally, the Finance department's role in the organization can be summarized in a few key responsibilities like, accurate and timely reporting (suggest # of days to close) and monitoring of cash (DSO's, % of AR aging over 60 days) and budgeting/forecasting support (# of budget versions - more challenging but if the tools and analysis are strong, there is less time looking at various iterations).

Vikas Raut
Title: GET
Company: Pilon Engineering Pvt. Ltd
(GET, Pilon Engineering Pvt. Ltd) |

There's one big KPI most people are missing. Some did get close. It's how do evaluate sales performance using KPI.


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