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Finance KPIs for SMEs


Several are shared KPIs that the Finance Head shares with the IT Head, HR Head, Sales Head, and Ops Head.  

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EBIT


EBIT stands for earnings before interest & taxes. 

​EBIT = Revenue - Operating Expenses

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EBITDA


EBITDA stands for Earnings Before Interest, Taxes, Depreciation & Amortisation. 

EBITDA = Revenue - Expenses (excluding interest, tax, depreciation & amortisation)

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ROI


​ROI stands for Return on Investment. 

ROI = (gain from Investment - cost of investment) / cost of investment

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Net Income Margin


Net Income Margin measures how much profit a company makes for each dollar in revenue. 

Net Income Margin = (Net Income/ Revenues) x 100

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Return on Sales


Return on Sales measures how much profit a company makes for each dollar in revenue. 

Return on Sales = (Net Profit / Revenues) x 100

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Operating Profit Margin


Operating Profit Margin provides an indicator of the operating efficiency & / or pricing strategy of a business.

Operating Profit Margin = (Operating Profit  / Revenue) x 100

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ROCE

ROCE stands for Return on Capital Employed & is a measure of the return a company generates from the capital invested in the business. 

ROCE =  EBIT /  Total  capital employed

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ROA 


ROA stands for Return on Assets & measures a company's profitability relative to the assets it owns. 

ROA = (Net Income during period t / Total Assets at the end of period t) x 100

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D/E Ratio


D/E Ratio stands for Debt to Equity Ratio & provides an insight into the extent to which a business is financed through debts versus equity.

Debt-to-Equity (D/E) Ratio = Total Liabilities / Total Equity

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Working Capital Ratio


Working capital ratio is a measure of how much liquid assets a business has available at any given time. 

Working Capital =  current assets - current liabilities

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Operating Expense Ratio

Operating expense ratio is an indicator of how well a company is managing the ongoing costs of operating the business.

Operating Expense Ratio = (OPEX in period t / Sales Revenue in period t) x 100

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CAPEX to Sales Ratio


CAPEX to sales ratio measures the level of investments a company is making into its future. 

CAPEX to Sales Ratio = (CAPEX in period t / Net Sales in period t) x 100

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P/E Ratio


P/E Ratio stands for Price Earnings Ratio which provides an insight into the extent that the current share price of a company is attractive to investors. 

P/E ratio = Current Price Per Share/Earnings Per Share

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Customer Profitability


Customer profitability is an indicator of how much profit a business is generating from individual customers. Customer profitability is basically a measure of the net dollar contribution made by individual customers to an organisation.

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Customer Lifetime Value


Customer lifetime value is an indicator of the financial value a customer provides over the lifespan of the entire customer relationship. 

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Return on Innovation Investment


Return on innovation investment  measures the returns generated from investments in innovation.

Return on Innovation Investment = [(Net Profit from new products & services) - (innovation costs for these products & services)] / (innovation costs for these products & services)

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Human Capital Value Add


Human capital value add is a measure of the extent to which employees add value to the business.

HCVA = Revenue - (Total Costs - Employment Cost) / Full Time Employees

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Revenue per Employee


Revenue per employee is an indicator of how much revenue is generated per employee.

Revenue per Employee = Revenue / Number of (full time equivalent) Employees

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Energy Consumption


Energy consumption is a measure of how much energy a company is consuming which can be measured by the amount of energy purchased from an energy supplier in a given period.

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Saving Levels due to Conservation & Improvement Efforts


Saving levels due to conservation & improvement efforts measures the total level of savings (in carbon emissions, water usage, energy usage or costs) generated from the conservation & improvement projects identified.

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Project Costs as Percentage of Revenue


Project cost as a percentage of revenue is one of the most common measures of the efficiency of project operations.

Total spend on projects (comprising hardware, software, hardware & networking costs - including outsourcing costs) as a percentage of annual revenues (sales)

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Project Cost Variance


Project cost variance is an indicator of the extent to which projects are delivered within budget.

Project Cost Variance (PCV) = SPC - APC
where 
SPC is the Scheduled Project Costs, & 
APC is the Actual Project Costs


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Sales Volume Projection accuracy forecast


Sales Volume Projection measures the projected or expected volumes of sales over a future period. It is basically a measure of the order book a company has plus any sales a company is sure to secure.

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Direct Product Profitability

Direct Product Profitability (DPP) measures profitability by product & therefore provides insights into the differing profitability levels of the products or services a company offers.

DPP = unit sales volume x the profit margin of the product

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Revenue per User

Revenue per User measures a company's profitability on a per-user basis. 

RPU = Total Revenue / Total Users (Customers)

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Percentage Revenue per Major Customer

Percentage revenue by major customer measures a company's profitability on a per-customer basis to establish how important individual customers are relative to the overall customer based. 

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Sales per Channel

Sales by channel is an indicator that breaks sales down by the channel through which the sales were generated. This provides an insight into the effectiveness of different channels such as direct sales, shops, online, etc.

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Quotation Conversion Rate

Quotation conversion rate measures the success rate (percentage) a company achieves of converting quotes for business into actual orders.

Quotation Conversion Rate = (Number of Successful Quotes / Number of Quotes submitted) x 100

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Up selling Success Rate


Up selling success rate measures the percentage of upselling attempts or opportunities that are successful & sales are made.

Up selling success rate = (Number of Successful Up-Sales / Number of Upselling Attempts (or Opportunities)) x 100

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Cross-Selling Success Rate

Cross-Selling success rate measures the percentage of upselling attempts or opportunities that are successful & sales are made.

Cross-Selling Success Rate = (Number of Successful Cross-Sales / Number of Cross-Selling Attempts (or Opportunities)) x 100

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Cost to Serve


Cost to serve (by customer or segment) is a measure that helps to understand the profitability of a customer account (or segment) by assigning costs of serving this customer based on the level of activity & overhead costs incurred by this customer. 

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Acquisition Retention Spending Ratio

Acquisition retention spending ratio provides companies with an insight into the amount they spend to acquire new customers compared to the amount they spend to retain. In most industries it is significantly more expensive to acquire new customers.
Acquisition Retention Spending Ratio = Spending to acquire new customers / spending to retain existing customers

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Cost Avoidance Score

​Cost avoidance score is a measure that helps to assess to what extent implemented cost reductions are realised. When companies embark on a cost reduction programme they need to establish whether actual savings have been made at the end of the program.

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