Key Performance Indicators (KPIs) are critical for any organization to track, as they provide insight into how well the organisation is performing and where improvements can be made. While there are many KPIs that can be tracked, some are more important than others. Here are 5 KPIs that every organization should track: Cash burn rate This is a critical metric for any organisation that is looking to manage its finances effectively. It is a measure of the rate at which an organisation is spending its available cash and helps to determine how much runway (time) the organisation has before it runs out of cash. Calculating cash burn rate Step 1: Determine the Period of Time The first step in calculating the cash burn rate is to determine the period for which you…
A balance sheet is one of the first reports we review whenever we assess an organisation. It allows us to understand the business’s assets and liabilities clearly and provides a snapshot of how those figures have changed over time. Understanding the basics of balance sheets is almost essential for any finance enthusiast. In this post, I’ll walk you through the most common sections and formulas to enable you to read and understand your balance sheet report. What Is a Balance Sheet? A balance sheet is a financial statement that presents a snapshot of the company’s assets, liabilities, and shareholder’s equity at a specific time. The balance sheet is one of three primary financial statements, along with the income and cash flow statements used to compile an annual report. A company’s…
The time value of money is a cornerstone of financial analysis. The time value of money is a financial concept that says money is worth more today than it will be in the future due to inflation. It is used by finance professionals to determine the value of cash flows in one period compared to another. The time value of money is the principle that money available now is worth more than an identical amount of money in the future. Why should you care about your money having a time value? understanding how interest rates affect your wealth can save you or your business a fortune. This concept can help investors make informed decisions about their portfolios and investments. Examples of Time Value of Money The time value of money…
We all like putting our best foot forward; similarly, this goes for organisations. Oftentimes, professionals charged with the duty of financial reporting do get overzealous and play fast and loose with the truth. There are different motivations why this is so, it could be to help secure new funding, strengthen specific partnerships, avoid the wrath of investors, or simply earn a performance bonus. Cooking numbers is an accounting euphemism for “massaging the truth” Whereas the scale and intent of the “cookery” may vary, cooking numbers is not entirely equated to fraud. However, corporate misdeeds can sour public perception and investor apathy. It is partly for this reason that the US legislated the now popular Sarbanes-Oxley (SOX) Act of 2002. SOX was directly inspired by the need to hold senior executives to account…
Financial controllers are senior managers charged with producing accurate books and records for a company. To do this, they must understand the operations of the business and the underlying relationships between inputs, outputs and the processes that support them. A financial controller’s role begins with being “the numbers person” and extends to creating reports and analyses that support strategic business decisions. Importance of financial control 1.Financial control at a strategic level When we talk about financial control at a strategic level, we are referring to the process of evaluation of concurrence and coherence regarding the financial plan and the strategic plan of the organization, ensuring the achievement of objectives of the latter. With financial control, you avoid last minute surprises at the end of the fiscal year. It is the…
Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions. It is the language of business, providing a clear and concise way to track financial performance and assess risk. Accounting also helps businesses comply with government regulations. There are two main types of accounting: bookkeeping and financial accounting. Bookkeeping is the process of recording day-to-day financial transactions, while financial accounting provides an overview of a company’s overall financial position. Financial statements show how a company’s assets, liabilities, and equity have changed over time. These statements are used by investors, creditors, and other interested parties to make informed decisions about a company’s health and prospects. The generation of financial statements has become much more efficient with the advancement of tools…
