WHAT IS A DASHBOARD?
A dashboard is mainly used by an organization or business as an information and analytical management tool that helps the management and executives to track, analyze and display Key Performance Indicators (KPI), key data information, and various other metrics to surveil the performance and health of the business, a department or any specific process or steps.
Now that we have understood what a dashboard is, let’s deep dive into an important constituent of dashboard, which is Financial Dashboard.
WHAT IS A FINANCIAL DASHBOARD
A financial dashboard is an information management tool that enables the accounting and finance team to track, analyze and report financial Key Performance Indicators (KPIs). The latest dashboards not only provide data visualization and reporting capabilities but also provide an advanced analytical finance platform allowing the finance and accounts executives to perform more deep data analysis and exploration. Such dashboards help them to make important informed decisions.
Below is a sample financial dashboard :
Source: https://www.datapine.com/dashboard-examples-and-templates/finance
WHY IS FINANCIAL DASHBOARD IMPORTANT
1. BRINGS IN CLARITY
Financial Dashboard helps the organization to analyze and explain the financial performance and also perform a comparison with historical data. It helps to understand the reasons for generating lower or higher profit margins and helps the employees as well as the management to understand what went wrong or what factors stood favorable to the organization. This information equips them with the ability to take future data-driven decisions.
2. DEFINE THE GOAL OF THE COMPANY
To ensure that the management team and all the employees understand the goal of the company and where the company is headed , the financial dashboard plays a very vital role. To implement such a dashboard, the management and the employees take action to achieve organizational goals.
3. BRINGS EQUALITY
Financial Dashboard helps to bring the members of the management, finance and accounts team to a common ground so that they can make use of their own experiences and knowledge for the same purpose and goal of the organization.
4. HELPS TO FIND FINANCIAL DATA IN ONE PLACE
A financial dashboard helps the management, finance and accounts team to find all the necessary information regarding the financial aspects of the organization in one place rather than searching for it in various folders or documents. This practice saves time and money for the organization.
5. INTERACTIVE DATA
Financial Dashboards can be prepared using various business intelligence tools or software. This helps in depicting the data in a visual and graphical manner which makes it easier to grasp and helps in quick decision-making.
6. STAND OUT FROM OTHER ENTREPRENEURS
Most entrepreneurs are unaware of the advantages the dashboard provides and they do not evaluate their financials. Preparing and presenting a financial dashboard helps them to stand out and have an edge over their competitors. Such practices can also attract investors and boost the overall confidence of the team members and the advisory team.
HOW TO PREPARE FINANCIAL DASHBOARDS
Step 1: CHOOSE THE PERFORMANCE METRICS
As the first step to creating your dashboard, you should determine the most important metrics for your organization that you would want to keep a track of. Apart from the default performance indicators such as cash, revenue, expense, and profit, decide what additional indicators you would want to monitor. Using 10-15 key performance indicators would be an ideal number to keep as a target. Whether you want to include an indicator in your dashboard is the decision-making you will do based on that particular indicator. For instance, liquidity is an indicator that you would want to include in your dashboard as many important decisions are taken based on the liquidity of your company.
If you would like to set up KPIs in your organization, please do download our playbook https://spiceroutefinance.com/insight/ultimate-guide-to-set-up-kpis/
Step 2: LAY DOWN TARGETS
Once the important indicators or metrics are decided, the next step is to allocate goals to each metric. Depending on the course of action of your company, there might be fixed targets for every month or various goals for different months. These goals become the forecasts that you have prepared for the company. For instance, you have planned to increase your manufacturing regularly. Based on that you can set a target as to how much quantity of raw materials you should purchase for that particular period of time. This helps to bring all the team members on the same page and work unanimously towards achieving the same goal.
Step 3: ACTION
It is perfectly alright to not feel confident about launching the dashboard as the next step. But it is more important to track and analyze the metrics as soon as possible before it gets too late. A pilot program of the dashboard can be launched initially and pick 3-5 most important metrics and keep a track of only those. This would help all the team members to understand, track and analyze these metrics in real-life scenarios. After the team gets a hang of the dashboard, the number of metrics can be expanded in one go or on a stage-by-stage basis.
Step 4: REPORTING MECHANISM
The next most important step is to determine the technique that will be used to share and report data. Data can be easily shared by giving login access to the team members. But for convenience and to ensure no data breach, printing out dashboard reports or downloading and sharing the reports in a PDF file with the team members will be more effective. The main reason for using dashboards is to make the work of keeping a track of the most important metrics easier, which in turn makes the reviewing purpose easier and gives more time to focus on developing strategies and various methods to help the company grow and flourish. So make sure that the reporting of the data from the dashboard is planned in a suitable way to achieve these goals.
Step 5: CONTINUOUS TESTING AND REVISION
There may be situations wherein you feel that a particular metric chosen in the initial stage is not important as thought earlier. Not every setting or reporting technique is what exactly you need. Therefore, the dashboard needs to be tested and evaluated at a certain point and ensure that it generates relevant data. Dashboards can be modified according to the company’s needs at any time. Therefore revise the dashboard settings as per the requirements of the team members and according to the information w actually need. Keep refining the reports over time to avoid redundancy.
I am sure you as a startup founder is eager to understand how to set up these dashboards in your company. Setting up Financial Dashboards is part of the CFO offerings we do for our clients. Please do reach out to us if you would want us to help set up one in your organization.