Finance OKR

Upgrade your finance reporting with powerful OKRs. See how finance objectives and key results can change your business.

What is a Finance OKR?

An objective and key result (OKR) is a system of creating milestones for your organization. More specifically, finance OKRs are milestones used by the finance team of companies. We are going to explore what are finance OKRs, how to set finance OKRs, and common examples of finance OKRs.

The finance department can be the biggest ally for founders, business owners, and CEOs. At the end of the day, all business decisions are made based on the capital and time available.

The OKR framework tells us to create a single objective and then a set of 3-5 related key results. For instance, your objective is to grow revenue by 25%. Meanwhile, you get there through your key results. Three key results may be increasing pricing 10%, converting more site visitors to purchasers, and expanding your product lineup.

At Alluxo, we look at finance OKRs having a direct impact on the financial health of a business. In our eyes, a finance OKR needs to directly tie to revenue, expenses, cash balance, or cash flow.

Finance objectives and key results focus on aligning the finance team around measurable targets.

How Do You Set a Finance OKR?

We think of finance OKRs as a series of stages to unlock. For example, someone might set an objective to "Get better at closing the books". This is OK. While it is well-meaning, this Objective lacks a definite end and it is not tied to an outcome.

A better objective would be to "Close the accounting books in 10 days". This objective is clear and concise. In addition, we can expand on what we can do with that extra time.

By closing the books faster, we can take time to analyze gross or net profit margin. Notice how this finance OKR does two things at once: (1) it gets information available faster and (2) it allows for more time to spend analyzing data, instead of simply preparing it.

The Alluxo team also recommends picking simple key results.

If you are looking to increase profitability, this can happen in a few ways. First, you can generate more revenue; second, you can increase your gross profit margin, so you have more contribution to expenses; and third, you can cut expenses. While it might be tempting to set a key result of "Cutting expenses by 50%", it may also be unfeasible.

Instead, if your objective is "Increase profit margin from 5% to 10%", then we recommend setting 3 key results, one related to revenue growth, one related to margin growth, and one related to cutting expenses. It is unlikely that your expenses are 50% too high, but there are always improvements that can be found by looking at the details.

We would also like to mention that finance OKRs should be specific. Setting a goal of increasing profitability works well for a small business, but may be too vague and too difficult to impelement at large corporations. You want to make sure you have the right ability to execute and meet key results.

Examples of Finance OKRs

Here are a list of objectives and key results for finance teams:

  • Objective: Reach $100,000 in EBITDA for June
  • Key Result 1: Implement new inventory management software
  • Key Result 2: Reduce outsourced design efforts by 20%
  • Key Result 3: Send personalized emails to encourage repeat purchases

  • Objective: Grow monthly recurring revenue (MRR) to $150,000
  • Key Result 1: A/B test email drip campaign that onboards users
  • Key Result 2: Create 3 product videos to address the top 3 customer support issues
  • Key Result 3: Schedule demos with every customer who signs up for the Pro tier

  • Objective: Reduce accounts receivable days outstanding to 30
  • Key Result 1: Make all of our invoices 2/10 net 30
  • Key Result 2: Automate our invoicing and follow-up through QuickBooks
  • Key Result 3: Call each customer who has an invoice past 15 days

  • Objective: Get budget variance to less than 5% (budget to actual)
  • Key Result 1: List all categories that have been overbudget 3 times in last 6 months
  • Key Result 2: Work with each department leader to understand their budget needs
  • Key Result 3: Evaluate how many one-off expenses last quarter were necessary

Who Benefits from Finance OKRs?

When creating an OKR, or any performance metric, it is important to consider the audience. A revenue metric for a controller or staff accoutant is very different than a metric directed for the CEO or Chair of the Board of Directors.

Below, we are going to explore how you should think about creating objectives and key results based on the position within the organization.

Controller or Director of Finance: These individuals understand the day-to-day operations of the business. In a smaller organization, they will be in charge of the entire company. In larger organizations, they will be responsible for a particular business unit (e.g., line of business or geographic region). When setting a finance OKR for the controller or director of finance, focus on something tactical and short-term.
VP Finance or CFO: The Vice President of Finance (VP Finance) or Chief Financial Officer (CFO) is the executive in charge of the entire finance department. As such, they need to strike a balance between understanding the day-to-day business realities and looking ahead to the next month or quarter. A VP Finance or CFO should understand how seasonability, a new product launch, or debt payments will impact the business. They should serve as the "right hand" to the CEO. As such, OKRs for vice presidents or CFOs should be higher level. The VP Finance or CFO should use OKRs as a way of understanding how their team does work, they should not be interacting with the key results themselves.
Treasurer: The Treasurer is an officer entrusted with the care of the company's funds. Often times, the CFO is also the Treasurer. For a Treasurer, it is important to understand the company's cash position and their need to raise additional debt or equity financing.
Board of Directors: The Board of Directors may have access to finance OKRs as well. In this role, they should have a dashboard that shows them the financial health of the business. Again, because board members are not involved in the business at a detailed level, it would be a mistake to provide them daily or weekly metrics. These more granular metrics should be available upon request, but OKRs for the board should focus on figures like total revenue, total expenses, revenue growth, profit and profit margin, and cash position. The Audit Committee in particular would be interested in having access to finance OKRs.

Start for free today.

Track metrics like the top performing ecommerce stores.