If you use a Balanced Scorecard, the goals or objectives from the financial perspective would be a great place to start building your dashboard. This perspective is usually pretty straightforward and tracks your profits, revenue, and costs. Most of the measures in this perspective are lagging indicators because they tell you what happened last month or last quarter.
Your dashboard should display metrics that provide a broad view of your company’s financial health. These vary by organization, but it’s common to see numbers related to profit, cash flow, revenue, etc. Two important things to keep in mind when choosing your dashboard metrics:
When you’re thinking about the metrics to include, also consider the audience. Ask yourself: Who will be viewing this dashboard? What numbers do they care about? Where will this be published?
For example, if you’re a nonprofit or municipality, you’ll likely have one version of a financial dashboard posted on your website showing how donations or taxes are spent in a format that’s easily understood by the public. You’ll have a second version of the dashboard containing more detailed, confidential numbers and “insider information” suited for the eyes of senior stakeholders. Plus, if those stakeholders happen to be CFOs, then maybe it’s appropriate to use complex ratios or advanced scoring.
As a barometer of financial health, a dashboard should report on your organization’s performance. Depending on the measures you use in your dashboard, some may be more suited to revealing trends over time while others may simply tell a story for that accounting period. For example, revenue and net income are ideal to track over time in order to understand important trends. In contrast, something like a ratio may be best displayed with other ratios for the current period only to indicate performance.
You should also have targets for your measures. With targets, you can see if you are above or below your plan. This will tell viewers where you’re succeeding and where you may be struggling so you can make informed strategic decisions. Many organizations use Red, Amber, and Green status indicators (RAG status) to quickly tell readers if this measure is above or below plan.
Charts are exceptional visual aids and we strongly recommend using them in your financial performance dashboards. It’s easier for viewers to understand metrics if they are displayed graphically, versus simply writing about how an objective is performing. Here are a few best practices to follow:
We recommend generating strategic dashboards on a quarterly basis. Anything more frequent than that cadence will turn into detailed operational measures and metrics. There’s nothing wrong with an operational dashboard, but it will most likely be suited for the financial operations team versus the strategic or executive teams. For high-level, strategic financial dashboards, quarterly is best.
After you build your financial performance dashboard, keep these three things in mind:
Remember that your strategic plan and success shouldn’t be solely focused on your financial metrics—the Balanced Scorecard framework includes three other perspectives. Operations, customers, and the people who make up your organization are all important, too, and will have their own metrics and dashboards. Want to learn more? See how ClearPoint handles reporting and dashboards!