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KPI Design and Implementation - Agenda Introductions KPI Example – Working Capital KPI Design and Implementation KPI Demonstration Q & A KPI Example – Working Capital KPI Example – Working Capital KPI Example – Working Capital Working Capital Performance KPI’s

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KPI Design and Implementation - Agenda

  • Introductions

  • KPI Example – Working Capital

  • KPI Design and Implementation

  • KPI Demonstration

  • Q & A


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KPI Example – Working Capital

KPI Example – Working Capital


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KPI Example – Working Capital

  • Working Capital Performance KPI’s

    • Important in most businesses

    • Can get off most Income Statements

    • and Balance Sheets

    • Published standards for WC numbers

    • by industry

    • Dell Corporation knows WC


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KPI’s in More Detail

  • Working Capital Performance KPI’s

    • CCC (Cash Conversion Cycle)

    • AR - Open Receivables

    • AR - Credit Sales

    • AR - DSO (Days Sales Outstanding)

    • AP - Open Payables

    • AP - Spend or COGS

    • AP - DPO (Days Purchasing Outstanding)

    • INV - Cost of Goods Sold

    • INV - Inventory Value

    • INV - Inventory Turns

    • INV - DIO (Days Inventory Outstanding)


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KPI - Accounts Receivable

Working Capital Math 101 - AR

DSO = Accounts Receivables / (Credit Sales / 365)

The lower the number the better. For example, If your DSO is

40, then the average number of days it takes to collect on

receivables is 40 days. That means your financing your

customer’s cash for 40 days.


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KPI - Accounts Payable

Working Capital Math 101 - AP

DPO = Accounts Payables / (COGS / 365)

The higher the number the better. For example, If your DPO is

40, then the average number of days it takes to pay a bill is 40

days. That means your vendor is financing your cash for 40 days.


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KPI - Inventory

Working Capital Math 101 - Inventory

Inventory Turns = Yearly COGS / Period End Inventory Value

The higher the number the better. Companies calculate COGS

differently. Some annualize COGS or use rolling 12 months.

DIO = 365 / Inventory Turns

Tells how long items sit in inventory. Lower is better.


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KPI – Cash Conversion Cycle

Working Capital Math 101

CCC = DSO + DIO – DPO

The smaller the number the better. Negative

CCC means you sell something to a customer

and get the cash for the sale before you have

to pay your vendors. Each industry has published

CCC numbers to be used as benchmarks

CCC highlights how well a company manages its

supply chain.

Dell has always been very good at this.


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KPI Example – WC - Cash Cycle

Inventory

Accounts

Payable

Accounts

Receivable

CCC

Cash


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KPI Design and Implementation

KPI Design and Implementation


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Reporting / Dashboards / KPI’s / Strategy

FSG’s

Transactions

General Ledger

Sub-Ledgers

Drill Path

Reporting / Dashboards

KPI Data Model

FSG Data Model

General Ledger / Sub Ledger Data Model

Transactional Data Model


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FSG – What Management Knows as Truth

  • Row Sets (Rows) - Dimension

    • Set of Accounts (GL Balances)

    • Calculation

  • Period - Dimension

  • Budget or Actual - Dimension

  • Set of Books – Dimension

  • Column Sets – Metric Value


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Breakdown of Inventory KPIs

WC – Inventory Turns, DIO

Cost of Goods Sold

Inventory Value

General Ledger

Sub-Ledger

Transactions

General Ledger

Sub-Ledger

Transactions

GL Balances

GL Headers

GL Lines

On Hand Quantities

Item Costs

GL Balances

GL Headers

GL Lines

MTL Material Transactions

MTL Transaction Accounts




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Inventory KPI Drill Path

WC – Inventory Turns, DIO KPIs

FSG / non-FSG

Period, KPI Class,

KPI Name

General Ledger Fact Table

Period, Account Structure,

Set of Books

Inventory COGS

Details

Inventory Value

Details

Inventory Turns

Details

Sub-Ledger and Transactional Details

Period, Account Structure, Set of Books, Item,

Inventory Org, Operation Unit, Transaction Type, ….


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KPI Model – Benefits

  • Simple Approach

  • KPI’s in Multiple Dashboards

  • Single Version of the Truth

  • Have underlying Drill Details

  • Self Documenting


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KPI Demonstration

KPI Demonstration







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