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How To Build Your Financial Dashboard
Learn the five important steps to building a powerful and effective financial dashboard.
Looking for a way to get a snapshot of your company’s successes (or struggles)? The first thing that usually comes to mind is a financial dashboard. When you create a dashboard that gives an effective overview of your fiscal performance, you have a powerful tool in your hands to make smart decisions. Your leadership team will know what’s profitable and what’s not, in addition to lots of other “dollars and cents” data. Keep reading to learn how to build a dashboard in a handful of steps.
Building A Financial Dashboard
Step 1: Figure out your goals.
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.
Step 2: Decide which metrics to include.
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:
- Don’t display an overwhelming amount of data. Keep it high-level, while offering the ability to drill down into details if needed.
- Summarize and interpret the numbers, versus just reporting them.
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.
Step 3: Track and report performance.
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.
Are you measuring the right metrics? Check out these 68 important financial KPIs, organized in six categories.
Step 4: Chart it.
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:
- For single data points, display the status in some way (such as a RAG status).
- If a metric is cyclical, show year-over-year (YOY) performance. For some industries—retail for example—it’s more helpful to compare performance YOY than against the previous month.
- If it’s beneficial to combine multiple metrics, do that! For example, short-term assets for cash, investments, and A/R should all be plotted together.
- Try to use similar charts for all measures. If you design a new chart for each measure, then the reader has to first figure out the chart, then figure out the data. For example, it’s easier to know that “Actual” results are a blue bar and “Target” results are a red line for all measures.
Step 5: Determine frequency.
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:
- Don’t get hung up on perfecting your dashboard right out of the gate. Accept that it’s a work in progress. Get a version in front of stakeholders and gather feedback so you can gradually tweak it until you reach perfection.
- Identify a person or team to own and manage the dashboard. There should be a single source “controlling” the contents and distribution.
- In addition to making sure all data gets added to the dashboard at the designated frequency, review and verify the data each reporting period. It’s critical that it remains accurate and relevant.
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.