Key performance indicators (KPIs) are one way to track, measure, and analyze your organization’s financial health. KPIs for manufacturing provide insights into your business so you can make informed, data-driven decisions that improve performance, growth, flexibility, and efficiency.
Improve Your Financial Indicators in Manufacturing
Want to enhance your business performance, growth, flexibility, and efficiency? Learn more about Porter Capital’s comprehensive factoring services and how they can boost your key financial indicators.
Essential Financial Indicators for Manufacturing Businesses
As you monitor these essential financial indicators, you can identify opportunities to enhance your operations, reduce costs, and maintain your competitive advantage.
Inventory turnover metrics help you measure the inventory constantly moving in and out of your facilities. It allows you to track how much inventory your company sells in a certain period, usually within a year. Inventory turnover is calculated by dividing the cost of goods for a specific time frame by your average inventory within that same time frame.
Inventory turnover KPIs reveal your sales strength and production efficiency. If turnover rates are low, your company has room to improve sales performance. If your turnover rates are high, you will want to focus on production efficiency to ensure you have enough inventory to meet demand.
Throughput measures the product volumes your company produces over a specific period. You can calculate throughput by dividing your inventory by the time it takes this inventory to go through the production process.
Tracking and maximizing throughput enables you to enhance operational efficiency and increase revenue. You can manage your throughput levels by:
- Locating and improving the weakest production areas
- Monitoring production processes in real-time
- Rewarding efficiency
Gross Profit Margin
Your gross profit margin is what revenue you have left after subtracting the cost of goods sold, which refers only to the direct costs of producing items, not any overhead expenses. This manufacturing metric is usually expressed as a percentage and is calculated by subtracting the cost of goods sold from net sales and dividing the result by net sales.
Monitoring your gross profit margin will help you keep tabs on your company’s financial health. This metric can help you determine where to improve spending, sales, and other operational processes.
Return on Assets
Return on assets (ROA) indicates how well your company manages resources and converts invested money into net income. It can provide insights into how profitable your business is when considering all of its assets. You can calculate ROA by dividing your net income by your total assets.
Higher ROA numbers suggest your organization may be more efficient at managing assets and generating profits. If you have a low ROA, you may find opportunities to increase asset efficiency. ROA differs between industries, so it is usually best to compare within your own organization or between similar companies.
How Alternative Funding Can Enhance Financial KPIs of Manufacturing Businesses
From invoice factoring to inventory financing, these innovative services provide manufacturers with the financial backing they need to fuel growth, optimize operations, and respond to market demands.
- Immediate Access to Capital: Traditional loans can take weeks or even months to process, but many alternative funding services can provide funds within days or even hours. This swift access to capital means manufacturing businesses can respond to opportunities or challenges without delay, optimizing their operational efficiency.
- Flexible Repayment Terms: Unlike fixed loan repayments, many alternative financing solutions come with flexible repayment structures, which can be aligned with the business’s revenue cycles. For manufacturers, this can mean less financial strain during low-revenue periods.
- Enhanced Cash Flow Management: Services like invoice factoring convert unpaid invoices into immediate cash, reducing the waiting period for payment and smoothing out cash flow. Consistent cash flow allows for steady operations, timely procurement of raw materials, and uninterrupted production cycles.
- Tailored Financial Solutions: Alternative financing often provides customized solutions that match the unique needs of a business. This customization ensures that manufacturers can choose financial solutions that align with their business models and growth trajectories.
- Cost Savings: With immediate access to funds, manufacturers can take advantage of early payment discounts from suppliers or bulk purchase benefits. Over time, these savings can lead to improved profit margins, positively influencing the KPIs.
- Operational Agility: With reliable financial backing, manufacturing businesses can swiftly adapt to market changes, invest in new technologies, or scale operations, ensuring they remain competitive and efficient.
By leveraging alternative funding and financing solutions, manufacturing businesses can not only enhance their immediate financial KPIs but also lay a foundation for sustained growth and operational excellence.
Improve Your KPIs With Help From Porter Capital
When you choose Porter Capital, you gain a partner entirely committed to streamlining your finances and helping your business thrive. Our reliable and comprehensive factoring services can help you increase cash flow, improve your manufacturing KPIs and enhance your operations so you can continue doing what you do best. Contact us online today to learn how our services can benefit your organization.