Financial Benchmarking: Which Metrics to Measure for Continual Improvement

From Blog Projects in Motion

financial benchmarking

Discover how using the right metrics and ERP software can improve forecast accuracy for finance managers.

Finance managers are experts at forecasting, but their systems often make achieving any high level of predictive accuracy quite difficult. With the continuing growth of data volumes it’s also becoming harder to know which metrics to use as well as how and from where to obtain them. This article explores how financial managers can organise their data and use Enterprise Resource Planning (ERP) software to gain forecast accuracy.

Professional services organisations use metrics such as the success rate of each project, on-time completion rates, analysis about whether each project is completed to budget and the efficient use of resources to measure their success and grow their business.

ERP software that is tailored to your organisation can better determine where to allocate your financial and human resources in order to achieve higher levels of efficiency and profitability.

As a finance manager you also need to consider the most appropriate key performance indicators (KPIs)

Here are some that are worth considering:

  • Days Sales Outstanding (DSO), which determines how well a company’s accounts receivables are being managed.
  • Sales revenue and sales conversion rates. These may also be known as proposal ‘win rates’ as defined by completed sales transactions. There also needs to be a consideration of sales and project costs to determine the return on investment (ROI).
  • The availability, cost, placement and utilisation of labour.
  • Projects that are at risk of failing or of being late. These projects may add increasing costs over an extended period and this will reduce their profit margin.

Once you’ve determined your metrics, you can design or set up the format of your ERP software’s dashboard to reflect what you wish to measure and forecast.

Ask yourself the following questions:

  • What charts, tables and visualisations would give our executives the best and most accurate forecasting of our financial performance across the enterprise?
  • What level of detail is required? It’s important to keep the dashboard simple by avoiding any unnecessary bells and whistles.
  • How much information is really needed? Too many metrics and too much information can become too hard to handle, lead to confusion and poor forecasting. Different individuals may also want to use different types of data, metrics and visual references. So it’s best to establish a standardised and consistent format.
  • How timely is the information? The data needs to be constantly refreshed to gain any level of accuracy.

ERP software that offers dashboard and analytics capabilities which helps to answer these questions will permit finance managers and other executives to make increasingly accurate forecasts of where and how to spend their budgets and their other resources – including staff. With a dashboard ERP and some forethought about process and metrics, Enterprise Resource Planning software makes forecasting much simpler.

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