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KPI Design and Implementation by Paul Scheibal

Jaros

KPI Design and Implementation - Agenda o o o o o Introductions KPI Example – Working Capital KPI Design and Implementation KPI Demonstration Q & A

KPI Example – Working Capital

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

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)

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.

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.

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.

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.

KPI Example – WC - Cash Cycle

Inventory Accounts Payable

CCC

Accounts Receivable Cash

KPI Design and Implementation

Reporting / Dashboards / KPI’s / Strategy Drill Path KPI Data Model FSG Data Model General Ledger / Sub Ledger Data Model Transactional Data Model

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

Breakdown of Inventory KPIs WC – Inventory Turns, DIO Cost of Goods Sold Inventory Value General Ledger GL Balances GL Headers GL Lines Sub-Ledger Transactions MTL Material Transactions MTL Transaction Accounts General Ledger GL Balances GL Headers GL Lines Sub-Ledger Transactions On Hand Quantities Item Costs

KPI Model – Single Table

KPI Column

PERIOD_VALUE PERIOD_TYPE KPI_CLASS KPI_NAME KPI_ACTUAL_VALUE KPI_PLANNED_VALUE KPI_PERCENT_ATTAINMENT KPI_DRILL_ATTRIBUTE1 - 10

KPI Model – Single Table PERIOD_VALUE PERIOD_TYPE 2-Feb 2-Apr 2-Jan 2-Mar 2-May 2-Feb 2-Apr 2-Jan 2-May 2-Mar 2-Apr 2-Feb 2-Mar 2-Jan 2-May PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD KPI_CLASS Backlog Accounts Payable Accounts Receivable Accounts Receivable FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement FSG - Income Statement Backlog Backlog Accounts Payable KPI_NAME Booked (not Shipped) Open AP $ Open AR $ Open AR (61+ Days Old) Net Sales Net Sales Net Sales Net Sales Net Sales Cost of Goods Sold Cost of Goods Sold Cost of Goods Sold Cost of Goods Sold Cost of Goods Sold Operating Expenses Operating Expenses Operating Expenses Operating Expenses Operating Expenses Expected Ship $ Entered (Not Booked) Open AP (Due in 30 days) KPI_ACTUAL_VALUE 923.97818

8477.77635

42192.567

21720780.55

22976749.3

20787848.45

23600349.64

26189956.35

11573221.78

16577141.16

12860329.29

16818850.31

16297571.77

5954034.54

11140687.59

6605636.04

5582273.31

5439291.01

923.97818

10.196

8477.77635

KPI_PLANNED_VALUE 22000000 22000000 22000000 22000000 22000000 12000000 12000000 12000000 12000000 12000000 6000000 6000000 6000000 6000000 6000000

Inventory KPI Drill Path Period, KPI Class, KPI Name WC – Inventory Turns, DIO KPIs FSG / non-FSG Period, Account Structure, Set of Books General Ledger Fact Table Inventory COGS Details Inventory Value Details Sub-Ledger and Transactional Details Inventory Turns Details Period, Account Structure, Set of Books, Item, Inventory Org, Operation Unit, Transaction Type, ….

KPI Model – Benefits

• Simple Approach • KPI’s in Multiple Dashboards • Single Version of the Truth • Have underlying Drill Details • Self Documenting

KPI Demonstration

Main Dashboard with KPIs Click here

Drill to AR Aging Summary Click Here

Drill to Open Receivables Summary Click Here

Drill To AR Invoice Details

KPI Design and Implementation – Q & A