The Financial Dashboard Guide - Make Better Strategic Financial Decisions
Until the financial dashboard, the responsibility for collating data into financial reports and budget plans had long constituted a thankless task for financial specialists, one whose results – lengthy finance reports – presented a challenge for employees and stakeholders alike to comprehend.
The financial dashboard was a significant breakthrough in this process, offering a way to synthesize information from various systems into a comprehensible visual format, visualizing financial data at the click of a button.
Using financial dashboards, finance and business managers can gain insight into their company’s performance at a glance, instead of spending hours extracting conclusions from spreadsheets or custom reports.
But the evolution in financial reporting didn’t end with the financial dashboard; it continues now with the adoption of business intelligence (BI) tools into the field of financial reporting and analysis.
While some finance professionals still choose to create finance dashboards manually in Excel, this laborious and error-prone task can now be done more quickly and efficiently with the use of specialized financial dashboard software.
The adoption of a finance dashboard is not just a matter of convenience – it is increasingly becoming a necessity. With company activities now spread across a variety of digital channels and software, BI tools can collect and analyze huge amounts of data related to these operations.
In doing so, they enable financial managers and teams to make quick, data-driven decisions. Financial dashboard software can harness the power of sophisticated data analytics and therefore provide a competitive edge.
And yet, a 2020 survey conducted among 350 global business leaders revealed that 55% of them had neither purchased, nor were actively using, business intelligence tools.
In this article, we’ll take you through what a financial dashboard is and what benefits it can bring to your company and employees, before exploring particular financial dashboard examples and looking at several common KPIs and why and who they’re used by.
Finally, since visualizing financial data is only effective after the right metrics have been chosen, we’ll take a brief look at some of the best tips for selecting the right metrics.
What is a financial dashboard?
Before we dive into all the features and benefits that financial dashboards have to offer, let’s go over some core concepts.
A financial dashboard is a financial information management tool that tracks, analyzes and visually displays relevant metrics and KPIs. It enables the performance of particular processes, departments or companies to be monitored and optimized.
A financial metric is a measurable value that provides information about your company’s financial performance. While metrics need to be quantifiable measures tied to business processes, what they are varies greatly depending on the type of business you have or what industry you’re in.
A Key Performance Indicator (KPI) is a particular example of a metric. While metrics are measures of an organization’s standard processes and may be only loosely tied to particular objectives, KPIs measure progress towards specific goals.
KPIs can be further divided into high and low-level KPIs. Low-level KPIs are related to day-to-day activities and are an indication of an individual’s or their department’s performance. By contrast high-level KPIs demonstrate a company’s overall performance.
GoSimplo is a financial dashboard example that tracks both KPIs related to both financial and operational performance. Use of this financial metrics dashboard allows businesses to more accurately determined client revenue. Use GoSimplo for free today.
Financial dashboard or Excel?
Dashboard financial reporting is an improvement over traditional means of financial reporting in that dashboards are more comprehensible and dynamic. But just how dynamic they are depends on the tools that one uses to create them.
Excel financial dashboards are usually created manually on a monthly basis, and thus are much more time-consuming and less timely than financial dashboard software solutions, which automate data collection and reporting, providing instant insights.
In effect, a financial dashboard is not just a visualization tool – they’re also powerful analysis tools that suggest appropriate actions based on the metrics tracked.
We’ll be going over the benefits of financial dashboards in another section, but let’s take a brief look here at the advantages of using a financial KPI dashboard over Excel dashboards:
- Integrate with other software
- Automated reporting and analysis
- Differential access in one location
- Secure infrastructure
- No coding required
Who uses a financial dashboard?
A financial dashboard is usually reviewed by finance specialists, like an accounting team or CFO. But they can also be shared with other company employees, to give them insight into their personal performance, or be shared with stakeholders to communicate progress and facilitate discussions.
As all these individuals and groups have different interests and roles, they may use different financial dashboards and metrics.
For example, a CFO – who needs a financial dashboard to identify performance trends or growth opportunities – will need a finance dashboard containing high-level KPIs.
A junior executive who will not be deciding the company’s overall objectives may only require visualizing financial data related to specific tasks.
Sharing financial dashboards with employees can boost engagement levels and commitment to the company. Letting employees monitor their performance and contribution to the company’s bottom line encourages a sense of personal responsibility and ownership.
A financial dashboard can also help set common standards for teams, as everyone can see the kind of information they are expected to understand and work with.
That being said, a financial dashboard is most useful to (and mostly used by) management professionals – CFOs, VPs, etc. – who have to deliver financial reports and monitor their company’s financial performance.
For C-level employees and managers, a financial KPI dashboard can do more than ease their reporting – it can actually contribute to reducing decision fatigue as clearly displayed KPIs suggest more easily what actions need to be taken.
Benefits of a Financial Dashboard
Apart from visualizing financial data to make it more understandable and communicable, financial dashboard reporting has a number of features that can improve communications, decision-making, risk-management, and more.
Let’s look at some of these benefits of financial dashboards when conducting BI reporting in greater detail...
Synthesizing data from different platforms with financial dashboards
A financial dashboard can easily integrate with other systems and collect data from them, providing automatic analysis and reporting, all on one site. GoSimplo, for example, integrates with some of the most popular project management and finance systems out there.
Not only does this ensure smooth operations and accurate data across systems, it’s also a major time-saver. Just think of all the individual platforms that businesses have to go to to extract data today.
Instead of wasting time on going to each platform separately and manually, financial dashboard software can synchronize all this data with your dashboard.
There it will be available to you in real time, providing immediately actionable insights. Synchronizing data in one place with a finance dashboard allows for an integrated view of your company’s performance, which in turn facilitates more comprehensive and strategic actions.
Working on a single platform with financial dashboards
Data is instantly available when using a financial dashboard. This is much more efficient time-wise, but beyond that a single access point has other advantages, like greater version control (as opposed to Excel spreadsheets distributed via email).
For stakeholders who don’t need to be looking at live data regularly, a financial dashboard can be exported as a pfd and sent via email on a regular (e.g. monthly) basis. This process can also be automated with the use of financial dashboard reporting software.
Different people require access to different information; by allowing you to set up different authentication procedures, a financial dashboard reporting enables you to grant differential access to a financial dashboard, depending on the status and needs of the users (managers, teams, clients).
Encourage collaboration with financial dashboards
A financial dashboard encourages collaboration via two features:
- User-friendliness: visualizing financial data makes it comprehensive for people with no expertise in finance, enabling communications between financial specialists and other employees.
- Coordination: the creation of a finance dashboard requires different groups to agree on common standards such as objectives and KPIs. All relevant individuals thus have to share their knowledge and coordinate to make decisions that are conducive to reaching those objectives.
Experience has revealed that financial dashboard reporting is most effective when all stakeholders participate. Collaboration is thus not only a feature facilitated by the finance dashboards’ communicative clarity, it is also a key ingredient to their success.
Improved decision-making with financial dashboards
A financial dashboard significantly improves decision-making in two respects:
By automating data collection and analysis, finance dashboards make decision-making faster by removing the lengthy periods needed for employees to collect and validate data, and to compile it into reports. Instead, real-time insights are available as a feature of the software.
The data provided by the finance dashboard is both accurate and timely, meaning that the decisions made with its use address current needs.
Stable financial environment with financial dashboards
By tracking metrics over-time, a finance dashboard reveals patterns and trends in the business’ functioning. With this information, managers can make more accurate forecasts and decisions for the future, hence contributing to a stable performance over time.
A financial dashboard is also conducive to a stable financial environment by virtue of their automation of reporting and analyzing processes. For example, smart alerts automatically inform users when something is wrong, facilitating the timely acknowledgement and resolution of issues.
Finally, the use of financial dashboards supports the development of a data-driven culture, as teams need to establish how to interpret and respond to the data.
Guidelines can be set up to define thresholds and tolerance levels for KPIs, making it clear when appropriate action needs to be taken. Such procedural clarity standardizes actions and processes, helping operations run smoothly.
User-friendliness & customization with financial dashboards
We’ve already seen that visualizing financial data makes it easier to interpret, but that’s not the only thing that makes it easy for people with different expertise to use financial dashboards.
While considerable expertise is required for the advanced use of both spreadsheets and Excel (creating complex formulas in spreadsheets is often a task for experts, while Excel also requires visual basic scripting knowledge), a financial dashboard makes use of them quick and easy.
Financial dashboard software like GoSimplo enables people without any coding knowledge to perform tasks like integrating their financial dashboard to their project management and finance systems, or creating sophisticated visuals – tasks that would otherwise require detailed technical knowledge.
Financial dashboard examples
As we’ve already touched upon, given their use by various teams and individuals, financial dashboards will differ among themselves. In light of this, the various KPI financial dashboard software solutions out there offer a variety of templates tailored to different roles and levels within the finance department.
Executive or CFO dashboards are suggested for financial executives or managers, for example. Other common finance dashboard examples include:
- Profit and Loss Dashboards
- Financial Ratios Dashboard
- Cash Management Dashboard
- Actual vs. Forecast Expense Dashboard
These financial dashboards will contain different metrics and KPIs. For example, a CFO’s financial dashboard will include KPIs like gross profit, which can act as a benchmark for comparing their company’s performance to that of their competitors. In general, this financial dashboard is meant to include KPIs that provide an overall picture of the company’s performance.
Commonly Tracked KPIs
There are a multitude of metrics that can be included and monitored in your financial dashboards, and your choice of KPI will most likely depend on your business case and industry.
Professional services businesses may, for example, want to measure their true bill rate, whilst this KPI is much less relevant for a product manufacturer.
Here we’ve picked out just a few of them to take a look at what they indicate, why they are relevant, and what financial dashboard they could be included in.
Perhaps the most basic KPI to measure, but also the most important for many CFOs and financial executives when financial dashboard reporting.
Revenue is the total amount of money generated from a project or business operations. It is calculated as the number of units sold multiplied by their respective prices. It is the money from which costs of producing goods or rendering services are deducted to calculate the income of a project.
A financial metrics dashboard ought always to include some form of revenue, as the baseline for understanding a businesses financial performance.
Gross Profit Margin
Gross Profit Margin is often included on a financial dashboard to measure what percent of sales revenue is profit by deducting the cost of goods sold (what it costs for a company to make a product) from the total revenue, and dividing that by the total sales revenue.
The Gross Profit Margin provides important insights into a company’s production and sales efficiency. For example, a low GPM could mean that a company’s production costs are too high, and therefore that it needs to streamline the production process. A fluctuating GPM, on the other hand, could indicate that a company’s sales aren’t steady.
In effect, the GPM highlights areas within sales and production that may require changes or improvement, helping a company make decisions about sales strategies, pricing, etc.
As the time-frame of the GPM is adjusted for particular sales-cycles, you can also add it to a financial metrics dashboard to monitor the success of particular promotions. In general, the GMP is an important profitability measure and a key component of a CFO financial KPI dashboard.
Net Profit Margin
While Gross Profit Margin only includes cost of goods sold, Net Profit Margin includes all of the company’s expenses and costs (like overheads, salaries, insurance, taxes, etc).
It therefore gives a more accurate understanding of the company’s profitability than the former, and so is often included on a financial dashboard.
Since Net Profit Margin is expressed as a percentage, it’s useful for comparing how well your company turns revenue to profits relative to other businesses in your industry. As a reflection of the company’s profitability, Net Profit Margin can also be used to make predictions about how fast the company will grow in the long-term.
The cost-benefit ratio is often included on a financial dashboard to summarize an analysis of the relationship between relative costs and the associated or expected benefits of a project.
The cost-benefit ratio can be expressed in qualitative terms, or in monetary figures. If a project has a cost-benefit ratio of 1 or higher (greater than 100%), the project is forecast to deliver positive results for the business and its stakeholders.
This is the ratio between current assets (cash, inventory and receivables) and current liabilities (debt and payables). It’s an indication of your company’s ability to use its assets to cover its financial obligations in the short-term (usually a year). In effect, it is a measure of liquidity.
The CR is usually used together with the quick ratio (meaning the two are displayed alongside each other in a financial dashboard), although the current ratio checks a company’s ability to pay over a longer period of time than the quick ratio.
This financial metrics dashboard lets investors see whether the company has healthy operating cycles, and enables CFOs to see whether they’ll be able to make investments in the future.
The quick ratio or acid test ratio is another short-term liquidity metric, permitting a quick assessment of your company’s financial health. As such, it is often displayed on a financial metrics dashboard.
The quick ratio doesn’t include inventory and other assets that cannot be converted into cash quickly in its calculation. As such, it gives a more accurate indication of a company’s ability to immediately cover its liabilities.
Operating Cash Flow
Operating cash flow (OCF) measures how much revenue a business is generating from its daily operations. It’s calculated by deducting operational costs (rent, cost of production, etc.) from the company’s net income.
OFC serves as a benchmark for CFOs to determine whether their company’s core activities are financially successful. It gives an indication of the opportunities for growth, and is therefore crucial for long-term planning. A positive cash flow is also one of the metrics shown to creditors to procure investment.
Given the large amount of data that is used to derive OFC, financial dashboard software comes particularly in handy when generating this metric.
Compound Average Growth Rate (CAGR)
Compound Average Growth Rate is a measure of returns over time on a financial dashboard.
It’s a representational figure that assumes that the profits from an investment were reinvested at the end of each period. Hence it’s not a true return rate, but it does provide a smooth overview of returns that is easily comprehensible and facilitates the comparison of different investment options.
Investors can therefore use it to compare alternatives for their capital, as well as to make forecasts. As such, it’s an important metric to include in CFO financial dashboards and those shared with company shareholders/investors (i.e. those with a particular interest in company growth).
How to choose the metrics for your financial metrics dashboard
Now that we’ve looked at some of the most popular KPIs to track with a financial dashboard, let’s give some consideration to the process of choosing the right metrics when visualizing financial data.
Metrics are calculated to show a particular feature of a dataset. But while revealing in some ways, metrics are blind to other characteristics of the dataset. Consequently, your financial dashboard should include a variety of metrics to analyze the same phenomena.
For example, simply measuring revenue doesn’t account for operating costs and so doesn’t give a complete picture of a company’s profitability, which can be more fully understood by also measuring the profit margin.
Metrics not only have different degrees of complexity and specificity, they’re also relevant over different time-frames. But however complex they may be, or however often you may need to check them, all the metrics you’ll be including in your financial dashboard reporting will share a number of characteristics.
Metrics should be:
It’s no use tracking something you can’t change. Don’t succumb to vanity metrics and instead only choose metrics for your finance dashboard that you can respond to with specific actions.
The point of metrics is to let you know where you are in relation to your goals, so you need to be choosing metrics for your financial dashboard that are directly relevant to the objectives you’ve articulated.
Ask yourself if changing a given metric would affect your objectives. If yes, then this is a relevant metric you should be tracking.
You should start by defining high-level objectives, like customer profitability, and deciding which measures have a direct impact on these. These primary goals need to be in place before metrics like price realization can be incorporated when visualizing financial data.
You should be able to compare the results of a financial metrics dashboard over a period of time, for example seeing whether it has changed over the course of a month or year.
Comparison inspires questions, like “why were sales slower in this quarter?”, which in turn sets your team on track to finding answers and making changes.
Choosing metrics is not a one-time task. Adapting your financial metrics dashboard is part of your learning curve, and you can’t expect to choose all the right metrics at the outset.
Changes to the metrics you monitor with a finance dashboard may also come from changes in your business environment, as new conditions emerge for you to analyse and track.
In effect, metrics need to be regularly screened, which involves asking questions like whether they’re still relevant to a particular problem, or whether you can envision taking a specific action in response to changes in those metrics, and what effect that would have.
As excellent visualization and data analysis tools, a financial dashboard is an invaluable asset to companies interested in streamlining their financial dashboard reporting in the interest of improved communications and strategic decision-making.
Providing simple and easy-to-use solutions to complex issues like systems integrations and big data analysis, a financial dashboard may become indispensable as companies expand their digital presence and the amounts of data they are accumulating and needing to process.