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KPI-Based Financial Analysis Consulting

A KPI-based financial analysis consulting is a powerful tool for tracking performance metrics in your business and identifying areas for improvement. This type of analysis requires a thorough understanding of the data and a keen eye to identify patterns and causal relationships. A good starting point is to use an established set of financial KPIs that can be easily measured and analyzed with your accounting software system.

The following eight financial KPIs are essential for a successful consulting firm:

1. Consultant Utilization
This key performance indicator measures the number of billable hours spent on client work compared to the total number of available hours per consultant. It is important to monitor this metric as it indicates the ability of your staff to generate revenue for your company. If this metric is low, it may be time to consider hiring additional consultants or implementing project management software to increase efficiency.

2. Cost of goods sold

This KPI measures the percentage of revenue left over from sales after accounting for direct costs such as raw materials and labor. It is a valuable metric to analyze because it can indicate the company’s efficiency in production and its ability to turn raw materials into profit. This metric is also used to compare the quality of your products with those of your competitors.

3. Fixed expenses

This metric shows the breakdown of all the non-sales and non-operational expenses that need to be paid on a regular basis. These include things like rent, salaries, office supplies and fixed marketing costs. It is important to keep an eye on these expenses because they can add up and have a negative impact on the profitability of your company.

4. Accounts receivable turnover

The accounts receivable turnover ratio is a measurement of the speed at which your company turns credit sales into cash. The higher the ratio, the better and more efficient your company is at extending credit. This metric can be used in conjunction with the current ratio to get a more complete picture of your company’s liquidity.

5. Budget variance

Another finance KPI is the budget variance, which explains the difference between your actual and budgeted figures for a given accounting category. It can be either favorable or unfavorable and is caused by many factors, including inaccurate forecasts, unexpected events and changes in market conditions. Keeping this metric as close to the actual as possible will ensure that your company is not spending more money than necessary.

6. Economic value added

The economic value added (EVA) is the sum of all operating profits after taxes, minus the cost of capital on a cash basis. This is a measure of the value that a company creates from its investors’ investments and is an excellent indicator of how well a company uses its resources to make a profit. If the EVA is positive, it means that the company is creating more value than its investments and debt. If it is negative, then the company is losing investor money.