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13 Financial KPIs For Accounting You Should Know

Sasanka Amarasiri — Sat, 25 Mar 2023 12:02:20 +0000

Key Performance Indicators (KPIs) are critical tools used by organizations to calculate their performance and track progress toward their goals. Accounting KPIs are specific metrics used to evaluate a company’s financial health and performance.

Well, if you work in accounting, I would like to recommend you below 13 financial KPIs for accounting.

1. Accounts Receivable Turnover

This means measuring how quickly a firm collects outstanding debts from its customers. It’s formula is as follows.

Accounts Receivable Turnover = Net Credit / Average Accounts Receivable

2. Return on Assets (ROA)

This means calculating how efficiently an organization uses its assets to gain profits.

ROA = Net Income / Total Assets

3. Return on Equity (ROE)

This means measuring the profit an organization earns with the money the that shareholders have invested.

ROE = Net Income / Total Equity

4. Accounts Payable Turnover

This means measuring how quickly an organization pays its creditors and suppliers.

Accounts Payable Turnover = Total Supplier Credit Purchases / Average Accounts Payable

5. Working Capital Ratio

This means measuring a business’s ability to meet its short-term financial obligations

Working Capital Ratio = Current Assets / Current Liabilities

6. Debt-to-Equity Ratio

This means measuring the proportion of a business’s financing that comes from debt versus equity.

Debt-to-Equity Ratio = Total Debt / Total Equity

7. Gross Profit Margin

This means calculating the percentage of cash left over from product sales after deducting cost of goods sold (COGS).

Gross Profit Margin = (Revenue – Cost of Goods Sold) / Revenue

8. Net Profit Margin

This means measuring the percentage of cash left over from sales after deducting all expenses, including taxes.

Net Profit Margin = Net Income / Revenue

9. Inventory Turnover

This means measuring the rate inventory is either sold, used or replaced during a period.

Inventory Turnover = Cost of Goods Sold / Average Inventory

10. Fixed Asset Turnover

This means calculating how effectively a business uses its fixed assets to generate sales.

Fixed Asset Turnover = Revenue / Net Fixed Assets

11. Operating Cash Flow Ratio

This means calculating how well a company can cover its short-term liabilities using cash generated from operations.

Operating Cash Flow Ratio = Operating Cash Flow / Current Liabilities

12. Earnings Before Interest and Taxes (EBIT) Margin

This means measuring a company’s profitability before interest and tax expenses are considered.

EBIT Margin = EBIT / Revenue

13. Quick Ratio

This means calculating a company’s ability to cover short-term obligations without relying on inventory. Quicks assets comprises of cash, marketable securities and accounts receivable only (quick assets = current assets – inventory – pre-paids).

Quick Ratio = (Current Assets – Inventory – Prepaids) / Current Liabilities

I’d love to hear what you think about this post, 13 Financial KPIs for Accounting You Should Know. Let me know in the comments or contact via the form.

The post 13 Financial KPIs For Accounting You Should Know appeared first on Solution Associates.

How To Get a New Sri Lankan Passport (1 Day Service)

Sasanka Amarasiri — Sun, 16 Oct 2022 01:09:18 +0000

Well, it is not as easy or as hard as you think. You do not have to practice patience before you go there like old days, if you follow below steps correctly.

Step 1: Take Photographs

Here are the list of the authorized studios. You can check the below link.

Click here to see the authorized studios

Take photos from a listed studio and they will send the photo submission acceptance note to the immigration department and provide you with the applicant’s original copy with reference and barcode.

Step 2: Make Online Appointment

There are several branches and you can make an online appointment via below link.

Click here to make online appointment

You can select the available date and time (currently its 45 days ahead) and you will receive the confirmation on your mobile.

Step 3: Documents Preparation

Filled Application Form, Acknowledgment of Photo Submission, Original Birth Certificate, Copy of National ID/DL, Copy of Previous Passport if available, Employment Letter if you want to include current position in passport.

Step 4: Submission Day

This is only applicable if you are going to Battaramulla Head Office.

Enter through gate 3, enter the Immigration and Emigration Department building, verify your photo signature with the stamp at the ground floor counters, enter the 2nd floor and get a token number, check your documents to present your token and stay. Number to call (they call token numbers in 50 slots, so no specific order, food and drinks available in this waiting area).

After dialing your token number enter the presentation area and wait for the presentation questions. Submit the documents with NIC/DL and previous passport for cancellation, officials go through the documents and give you the declaration form for fingerprint signature. National ID/DL and previous passport will be returned and other documents will be kept here.

Fingerprint and Payment (Cash only, Rs. 15,000/- for a passport), once you make the payment a receipt will be issued with the collection counter number and you will receive a text message as well as payment acknowledgement. You will get 3 messages in total. 1. Accept payment 2. Accepted for processing 3. Ready to collect. After you receive the 1st message it will take about 5 hours to collect (this may vary).

The collection is on the 1st floor. Your name will be called within 20 minutes after you receive the 3rd message. Provide your token number and the receipt issued after payment and they will release your passport along with the submitted documents. After you add double check that the details like spelling, DOB, NIC number, DOB, gender etc. are correct.

That's It.

I must say this is very systematic and efficient, 99% friendly and helpful staff. If you think you are confused don’t hesitate to ask the staff questions. Food and drinks are available in all waiting areas. Wish you good luck..!

I’d love to hear what you think about this post, How To Get a New Sri Lankan Passport (1 Day Service). Let me know in the comments or contact via the form.

The post How To Get a New Sri Lankan Passport (1 Day Service) appeared first on Solution Associates.

The Role of Organizational Leaders in Post COVID-19 Crisis Management Through Corporate Governance Practices in Finance Industry of Sri Lanka

Sasanka Amarasiri — Wed, 01 Dec 2021 05:45:37 +0000

COVID-19 has generated significant uncertainty and high inconsistency in the capital markets in almost all the countries and the impact it caused thus far is yet to be determined. As with the spread of the virus, adverse impacts are likely to continue. Political leaders around the world consider COVID-19 is the biggest challenge they confront since World War II (Allam, 2020). To mitigate the impact, governments and central banks responded to the economic crisis with both fiscal and monetary tools in remarkably high degrees (Benmelech and Tzur-Ilan, 2020). Though containment initiatives like quarantine and social distancing methods practice to control the outburst of COVID-19, IMF forecasts global growth failure and the worst economic downturn since the great depression in 1930s (Amir, 2020).

As a developing country, Sri Lanka’s finance industry has been most affected by the crisis, with the breakdown of financial market stability since February 2020. Leaders of the financial institutions of the country have a greater responsibility to stabilize the economy by lowering the delinquency level and introducing a proper money circulation process as Sri Lanka has been re-marked as a lower-middle-income country (Worldbank, 2020) otherwise negative impact caused due to the closure of airports, reduction in imports cannot be reinstated for decades. Therefore, this blog assesses potential roles of leaders and strategies they should follow in post COVID-19 crisis management in finance sector of Sri Lanka through corporate governance practices.

Corporate Governance in brief

Corporate governance describes the processes, laws, policies and institutions that manages organizations and corporations in the way they direct and administer their operations while working to achieve organizational objectives and manages the connection between stakeholders including the shareholders, managers and the board of directors (Khan, 2011). Tripod of corporate governance shown below.

The value of corporate governance comes to light in modern corporations as a result of the separation of ownership and control in organizations (Alsharqawi and Alsharqawi, 2019) that occurs the agency problem, the conflict of interest between the managers/directors and dispersed shareholders (Maher and Andersson, 1999).

Main components of corporate governance and its importance

Accountability, ethics and transparency are main components of ethical governance and they create part of corporate governance model along with the values such as fairness, commitment, integrity, leadership, confidence, competency and respect (Gebba and Aboelmaged, 2016, Ogunyemi and Laguda, 2016).

Taking into the account of the importance of values in good governance, negligence of corporate governance in organizations usually leads to substandard financial performance which eventually cause damage to brand, reputation and financial of the company (Rubino and Vitolla, 2014). Therefore, a reliable corporate governance model shrinks unethical behaviour such as fabrication of financial information and protect shareholders from deceiving (Ng et al., 2015).

Chicago’s Board Options Exchange Volatility index which is an indicator of risk and uncertainty has rose to its highest level ever recorded in March 2020 due to the prevailing pandemic situation. Risk management gained attention in corporate governance and ethical governance influences effective risk management (Soltani, 2013, ElGammal et al., 2018, Peters and Romi, 2013), meaning, and risk management is believable to be more worthwhile in corporate governance framework.

Moreover, risk management process includes, identification of risks, setting up internal controls for risks beyond risk appetite, assessing residual risks, analysing effectiveness of internal controls etc. Corporate governance practices always keen on directors to review the effectiveness of internal controls and proper governance framework to manage risks.

The status of corporate governance of finance sector in Sri Lanka

Although implementation of corporate governance practices is voluntary and some rules are included in the listing rules of Colombo Stock Exchange and some practices are specially mandated by the governance rules imposed by statutory and regulatory acts (Heenetigala, 2011). To comply with section 3(6) f Direction 11 of 2007 issued by the monetary board of Sri Lanka, risk management committee shall be formed by banks and financial institutes of Sri Lanka (Dharmadasa et al., 2014).

The risk committee assists the board of directors by reviewing major risk exposures and steps to monitor and control and determining the effectiveness of implemented measures. The Key Risk Indicators (KRIs) are usually used for assessing and monitoring risks regularly. In terms of financial sector, risks are mainly categorised as credit, market, liquidity, information technology, operation, strategic etc.

Furthermore, risk committee sets statutory, regulatory and fiduciary responsibilities relate to risk management. As a proactive approach, many risk committees also discuss macro-economic factors in global level (Al-Hadi et al., 2015). However, it is rare to see a systematic approach such as through analysis of principal risks, setting up inter-connectivity between principal risks to the viability of the company as stress tests (Heenetigala, 2011).

Finally, board shall delegate the authority to audit committee to assess the risk management process ensuring financial assurance (Bedard and Johnstone, 2004). Some institutes have considered the business continuity as well as the disaster recovery plan with their risk committees to be in line with the statuary requirement. However, directors as the leaders of an institute shall follow rigid risk analysis in sake of the future of the company.

Suggestions to enhance stability of Sri Lanka’s finance industry through corporate governance practices in post COVID-19 era

COVID-19 has reminded of the importance of corporate governance while leadership aiding institutes to succeed in competitive advantage and unchanged in long-run. The board of directors shall understand the importance of ensuring long term competitiveness when addressing social crisis. Nowadays, shareholders expectation of focusing on risks and opportunities has enlarged to a maximum sustainable value creation. Hence, all aspects need to be integrated for an integrated corporate governance relating to below four areas.

01) Long term value creation through aligning strategy and correct capital allocation

Leaders must change strategies and welcome advanced and disruptive innovations of digitalization, adaption to new economies, workplace changes, constraints in social and ecological life etc (Trapp, 2020). As an example, during a lock-down amidst pandemic situation, annual general meetings (AGMs) can be held virtually where electronic voting can be arranged. Also, directors shall ensure correct capital allocation priorities with returns to shareholders.

02) Rigid awareness in associated risks and act wisely

Directors shall identify associated risks in depth where environmental, social, economic factors are rapidly changing. It is vital to look for other innovations, investments and technologies to be used for current risks as well as for predicted future risks (Bedard and Johnstone, 2004). Good governance provides assurance on ethics, compliance, anti-corruption as well as provides key data stewardship in area of assurance from cybersecurity, governance of artificial intelligence and machine learning etc (Goldman and Filliben, 2001).

03) Prior preparedness to a crisis

Leaders shall be able to oversee systemic crises rising either, financial, or ecological or social etc. The ability to oversee and proactive approach is vital to respond and recover easily. Board shall aid the directors in critical functions, operational aspects with their oversight on risks, looking on health of employees etc (Aguilera, 2005).

04) Cooperation for strengthening the work environment

It is the responsibility of the board to align the workforce be prepared for any alignments in future. This also includes righteous payment of taxes and ensuring social justice.

Directors are not exempted from the change caused by the pandemic. They are spending more time on board responsibilities and when board meetings are being virtual, owners have their same level of questioning and challenging the management. The above measures will enable the leaders share the responsibility for a profound social, economic and environmental system to operate with a more integrated corporate governance approach. In post COVID-19 era, boards will be required to work with directors to ensure risk management and company’s strategic planning in order to recover from the crisis (RajibShaw et al., 2020).

At TED talk, Sinek (2014) presented a phenomenal speech by highlighting that leadership is not just a rank, it is a choice. He also emphasised, “we call them leaders because they go first. We call them leaders because they take the risk before anybody else does, we call them leaders because they will choose to sacrifice so that their people may be safe and protected” (Sinek, 2014). This pandemic has made the leader’s job more stressful, demanding and devoting more time and effort on crisis management. A top down approach to identify principal risks and bottom to top approach for operational risk identification is vital.

I’d love to hear what you think about this post, The Role of Organizational Leaders in Post COVID-19 Crisis Management Through Corporate Governance Practices in Finance Industry of Sri Lanka. Let me know in the comments or contact via the form.

Reference

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