Software KPIs

KPI Performance Key

Your business may just be beginning to track this metric, perform this business function or identified this as a problem. Improved execution in this area should be a high priority.

Your business is competitive in this area, but there’s still room for advancement. Consider investments to improve related operations to achieve better results.

Your performance in this area is considered best in class and is superior to the average company in your sector. You’ve laid a solid foundation in this business function, and the next step is optimization.

You’re achieving the optimal results for this metric. Your business processes in this area are highly efficient and stand out against competitors. Keep investing in this area to maintain these results.

Top Performers

Days Sales Outstanding

Many companies celebrate closing a sale with the signing of a big contract. However, closing the sale isn’t enough to keep a software company running. Collections are critical to cash flow, enabling businesses to make timely payments and investments. The faster companies are able to collect from their customers, the more successful the business is. Many software companies include negotiated payment terms in their contractual agreement with their customers and have a dedicated collections team that focuses solely on receiving timely payments to optimize days sales outstanding.

102 days
Foundational
69 days
Competitive
57 days
Best in class
45 days
Transformative

Software Research & Development

Software

11.29%

Average % of Sales Spent on Research & Development

Source: Finlistics

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As companies of all kinds increasingly rely on business applications to manage and inform day-to-day tasks, the value of embedded analytics will only grow.”

To read more about embedded analytics, check out this article.

Revenue Growth

Revenue growth is a key indicator of successful software companies making adaptations to new trends and technology in the ever-changing software space. The ongoing shift from traditional on-premise software to cloud-based and subscription services has put pressure on software companies to maintain steady revenue growth from their cloud offerings. This has forced traditional software vendors to shift focus and allowed the entry of new cloud first businesses in to the marketplace. Companies that can maintain a steady recurring revenue growth rate are the ones that will stand out in this increasingly competitive space.

2.5%
Foundational
14.7%
Competitive
23.5%
Best in class
32%
Transformative

Renewal Rate

The Software as a Service model dominates today’s software industry, so renewals are the ultimate measure of success. Renewal rates indicate how satisfied your customers are with your product and how sticky your product is. Other important metrics derived from renewal rate include attrition and customer lifespan. A lower attrition metric means a longer customer lifespan and more revenue for years to come. Renewal rates can be calculated based on the count of customers or the value of contracts. Many software companies calculate the renewal rate in several ways to get a full picture.

70%
Foundational
80%
Competitive
90%
Best in class
> 95%
Transformative
Foundational
Competitive
Best in class
Transformative

Revenue Growth

2.5%

14.7%

23.5%

32%

Revenue Growth

This metric indicates the rate at which your company’s total revenue is growing.

Days Sales Outstanding

102 days

69 days

57 days

45 days

Days Sales Outstanding

How many days, on average, it takes your customers to pay invoices. The lower this number is, the better. Also called DSO or Days Receivable, it is a financial ratio that illustrates how your receivables are being managed.

Renewal Rate

70%

80%

90%

> 95%

Renewal Rate

The percentage of existing customers that renew their subscriptions each year. This metric is critical to software businesses because keeping existing customers is cheaper than signing new ones and contributes to overall revenue growth.

Time to Close Books

> 10 days

5 days

2 days

< 1 day

Time to Close the Books

How many days it takes your finance team to produce a Profit and Loss Statement, Balance Sheet and other analyses so that managers can understand how the business performed for that period (typically monthly). The fewer days, the more efficient the finance team.

Finance FTEs per $50M Rev

> 4 FTE

3.5 FTE

2.6 FTE

1.8 FTE

Finance FTEs per $50M Rev

A calculation of how many FTE (Full Time Equivalent) Finance department resources are required for each $50M in revenue earned.

Annual Budget Cycle Time

> 32.5 days

32.5 days

29 days

25 days

Annual Budget Cycle Time

How many days it takes for the finance team to create their annual budgeting. Faster means the finance / FP&A team is more efficient and data is more readily accessible for budget building.

Billable Utilization

< 66%

66.1%

72.7%

78%

Billable Utilization

The percentage of time that the company’s consultants are billing clients. The higher the better, until it gets to a point where it negatively impacts morale. The typical target utilization is 80%.

HR to Employee Ratio per 100 Employees

> 2.3

2.3

1.3

0.8

HR to Employee Ratio per 100 Employees

A calculation of how many HR FTE (Full Time Equivalent) resources are required to manage each 100 employees. The fewer HR full-time equivalent employees required per 100 employees, the more efficient your human resources department.

% of Total Purchases Procured via Maverick Buying

> 1%

1%

0.7%

0.3%

% of Total Purchases Procured via Maverick Buying

The percentage of total purchases made where an existing purchase contract or policy is ignored by employees. Maintaining a low proportion of maverick spend avoids operational risk, additional process cost and overspending.

Source(s): APQC, SPI, Finlistics

Other Categories
This metric indicates how fast your company is growing, measured by total revenue. The higher this percentage is, the faster your revenue growth.
How many days, on average, it takes your customers to pay invoices. The lower this number is, the better Also called DSO or Days Receivable, it is a financial ratio that illustrates how your accounts receivable are being managed.
A calculation of how many FTE (Full Time Equivalent) resources managing the Accounts Receivable process are required for each $100M in revenue earned.
How many days it takes your finance team to produce a Profit and Loss Statement, Balance Sheet and other analyses so that managers can understand how your business performed for that period (typically monthly). The fewer days this number is indicates a more efficient finance team.
A calculation of how many FTE (Full Time Equivalent) resources managing the accounting & finance department are required for each $50M in revenue earned.
How many days it takes for the finance team to do their annual budgeting. Faster means the finance / FP&A team is more efficient and data is more readily accessible for budget building.
The percentage of time that the company’s consultants are billing clients. The higher the better, until it gets to a point where it negatively impacts morale. The typical target utilization is 80%.
A calculation of how many HR FTE (Full Time Equivalent) resources are required to manage each 100 employees at your company. The fewer the HR full-time equivalent employees required per 100 employees, the more efficient your human resources department is.
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