Three common Accounting Key Performance Indicators (KPIs)

Here are three common Accounting Key Performance Indicators (KPIs):

1. **Gross Margin Percentage**: This KPI measures the percentage of revenue that is not accounted for by the cost
of goods sold.

Formula: (Revenue – Cost of Goods Sold) / Revenue x 100

Example: If a company has $100,000 in revenue and $60,000 in cost of goods sold, their gross margin percentage
would be:

(100,000 – 60,000) / 100,000 = 40%

2. **Accounts Receivable Turnover**: This KPI measures the average amount of time it takes to collect payment from
customers.

Formula: Cost of Goods Sold / (Average Accounts Receivable x Number of Days)

Example: If a company has $100,000 in cost of goods sold and $20,000 in average accounts receivable with 60 days
to collect, their accounts receivable turnover would be:

$100,000 / ($20,000 x 60) = 2.5

3. **Days Inventory Outstanding (DIO)**: This KPI measures the average number of days it takes to sell inventory.

Formula: Average Inventory / Cost of Goods Sold per Day

Example: If a company has an average inventory value of $50,000 and sells $10,000 worth of goods each day, their
DIO would be:

$50,000 / $10,000 = 5 days

These KPIs provide insights into a company’s financial performance, such as profitability, cash flow management and inventory management.

#financial_performance #kpis #mindstormGR