New accounting KPIs: The new key figures in accounting

Criteria: What matters for KPIs?

There are a few important criteria that have to be considered when developing accounting KPIs, before you can just start defining your own accounting key figures.

In accounting, KPIs are used to measure the degree to which certain targets have been achieved. To do this, you first have to define these targets properly.

Such a target should always be as specific, measurable, attainable and realistic as possible and should be achievable in a timely manner. The acronym SMART makes it easy to recall these attributes when defining appropriate accounting targets.

It only makes sense to measure key figures for performance if they also have an impact on the achievement of associated targets. In other words, the KPIs within the context of your company must be controllable and influenceable.

Measurement simply makes no sense otherwise. This is because KPIs that are dependent on external factors are difficult to control.

Your accounting KPIs should not become an end in themselves. Improving a new KPI should thus involve as little additional work as possible. That is simply unproductive – and is more likely to harm your company than benefit it.

Accordingly, make sure the processes you have defined are fully harmonised with existing ones – and that you won’t have any unnecessary extra work to achieve specific newly defined targets.

The robustness of the underlying data is essential if you want to work with KPIs in accounting or bookkeeping. In other words: the key figures can only be as good as the data used to calculate them.

The use of business intelligence software must be mentioned explicitly here: it can make data generation much easier, avoid the risk of errors – and, in particular, help to analyse the gathered data reliably and prepare it quickly and easily.

Accounting KPIs are only meaningful if they are checked at regular intervals. This is the only way to identify a development reliably – and correlate it with specific adjustments.

That’s why we recommend measuring your accounting KPIs regularly. This is the only way you can reliably analyse whether your processes are developing in the right direction.

The growing significance of the new accounting KPIs in the context of electronic payments

Digitisation is also changing the way we pay. This in turn has a direct impact on the daily work of finance and accounting teams – especially in retail companies, restaurants, the cultural sector and in the beauty and wellness industry.

Electronic payments are not only becoming ever more important in e-commerce, but also at the POS itself. They have accounted for a steadily growing share of total revenue over the last few years according to EHI surveys. In 2022, for example, the share of card payments at the POS was 59.7% – and rising!

The resulting service fees and the delays between the payment itself and the receipt of funds create a new kind of complexity for accounting that needs to be managed properly.

The finance team also need to review acquirer fees, as these fees are a factor that should not be underestimated as their percentage of total volume increases. A number of completely new finance and accounting KPIs are consequently becoming ever more significant.

The classic accounting KPIs

Regardless of the company type or business model: there are a few classic accounting KPIs that provide important insights into the effectiveness of a company’s payment processes. We explain a few of the most important ones to you here.

KPIs for liabilities from deliveries and services

“Liabilities” refers to all outstanding payment amounts owed to companies that have provided a specific service. In other words: all open invoices that need to be settled.

Days payable outstanding (DPO)

Invoice cycle time

Cost per invoice

Accounting KPIs for receivables from deliveries and services

Receivables are the outstanding payment amounts for all products or services that have already been provided for customers. In other words: all open invoices that the company is still owed.

Days sales outstanding (DSO)

Average days delinquent (ADD)

Accounts receivable turnover ratio (ART)

KPIs for internal accounting performance

In addition to the “classics” above, there are a number of accounting KPIs that in particular measure how efficiently processes are running within bookkeeping and accounting. We’ve listed the KPIs we feel are most important in this context for you here.

Accuracy of accounting records

Reconciliation accuracy

Average time for payment reconciliation

The new accounting KPIs

In the light of the ever increasing number of electronic payments, a range of new KPIs are playing an increasingly important role for bookkeeping and finance departments, especially in retail, restaurants and the event sector.

On the one hand, you have the costs of processing electronic payments, but, on the other, you have to consider the increased efficiency that can be achieved using new automated solutions in accounting.

New accounting KPIs relating to automated payment reconciliation

The large number of electronic payments combined with their high complexity in the context of bookkeeping processing often pushes accounting teams to the limits of their capacities. No wonder then that more and more companies are taking advantage of the option of automated payment reconciliation.

This is based on software solutions that import all necessary data automatically from different sources, reconcile this data – and then export the finished posting entries to the respective bookkeeping system.

New accounting KPIs relating to automated payment reconciliation measure how well this automation is working – and how much they are actually relieving the burden on the accounting teams.

Percentage of automatically reconciled payments

Percentage of manual adjustments

With the increasing number of card payments and mobile payments, the percentage of fees that companies have to pay to payment processors (acquirers and payment service providers) is also rising.

Controlling and managing these fees is becoming an increasingly important finance discipline, because substantial costs can quickly be saved here. The basic requirement is first to create the necessary transparency for the amount, percentage and composition of these fees.

Payment processing cost ratio

Average cost per transaction

Transaction costs as a percentage of revenue

Average time to implement new payment service providers

It’s also worth mentioning universal software solutions here, which can make it much easier and faster to integrate new payment methods.

The increasing importance of dashboard tools for accounting KPIs

In terms of generating, analysing and displaying accounting KPIs, new software solutions offer managers in bookkeeping and controlling a whole variety of new possibilities: The underlying data for accounting KPIs is continually gathered automatically, analysed reliably and prepared immediately in customisable graphics or reports.

Practical dashboards allow managers to review significant KPIs and their development at a glance at any time. A good example of this is the “Payment Analytics Center” from Matchbox.