Financial KPI Metrics In ERP: Measuring Success

Someone analyzing financial metrics in ERP

Last week, we talked about ERP implementation KPIs. It marked the first entry in our new weekly series. Today, we’ll continue it with financial KPI metrics in ERP. Our goal is to help you set project success metrics.

Financial KPIs are the most common in any industry. After all, revenue and profit are easy to quantify. But, what are the best KPIs for ERP projects? That’s what you’ll learn.

For this article, we’ll go back to this study. We’ll summarize their observations below.

What are financial KPI metrics in ERP?

Financial KPIs include everything within a company’s economy. That includes revenue, profits, inventory, receivables, and more. Financial KPIs shed light on an ERP project’s return on investment. That’s why they’re a staple in success measures.

Yet, they’re not the only KPIs. They offer tangible metrics. As such, financial KPIs are crucial for validating other metrics. Still, we can’t rely solely on them.

The most important financial KPI metrics in ERP

In the study, we can assess 9 financial KPIs. Yet, many of them overlap. Thus, we can summarize several of them into one.

When assessing financial KPI metrics, numbers are crucial. As such, you shouldn’t expect subjectivity. That’s only relevant when choosing which KPIs to focus on.

Gross margin

Your gross margin is the first step. After all, it offers your total sales revenue. Thus, it’ll be crucial for the following KPIs.

Net profits

Then, we must calculate how much of that revenue is profit. So, your net profits post-implementation are the next block.

Revenue and profit growth

Now, we move to calculate growth. Your goal is to track the previous metrics. After a while, we can compare that data. This difference will show your ERP’s financial impact.

Inventory turnover and reduction rate

Naturally, ERP software and inventory share an intimate relationship. Thus, your investment should optimize your inventory management. Thus, turnover and reduction should show positive signs post-installation.

Receivables turnover

Today, most ERP systems excel at receivable management. So, your receivable turnover should improve. Our clients report better efficiency at collecting receivables. If you deal with credit, this KPI is crucial.

Cash conversion and business cycle

Finally, your resources should convert into cash flow. As such, cash conversion is critical for ERP assessment. Likewise, your business cycle will provide a financial overview. It’ll encompass all previous KPIs and more.

How to set the best financial KPI metrics in ERP

Each project is different. As such, crucial financial KPI metrics in ERP vary with every case. Ideally, you want to care more about certain metrics. This hierarchy depends on your firm’s nature and goals.

The following aspects will change your KPIs:

  • Products or services.
  • Inventory size.
  • Client and sales volume.
  • Investment in the project.

Luckily, we’re here to help. We can ensure your KPI’s setup and execution. For any questions, book your free meeting here!

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Zero Point ERP Solutions

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