Business decisions have and always will require a sound foundation of financial reporting, in order to ensure that the results of whatever actions taken by your organization are maximized. A critical aspect of financial reporting is the creation of quality dashboards. Dashboards empower your finance team and others in your organization to extract valuable insights from visualized data in order to formulate the most thoroughly informed business strategy possible. In order to improve your approach to dashboarding, it is critical that you understand the most important aspects of good dashboards, and how you can maximize your specific benefits in this process.
8 Aspects of Good Dashboards
1. Reliability
While it may seem obvious a dashboard should have a foundation of reliable data, it is unfortunately common for most small business owners to have lost confidence in the accuracy of their financial reporting. The data in your dashboard must be produced from an accounting process with documented, standardized procedures and tight internal controls. Accurate underlying data is the cornerstone of confident, informed decisions in any business.
2. Action Orientation
An effective finance dashboard provides visibility into key performance metrics that should spark questions. These questions, in turn, should spur decisive action. It’s only through these questions that you will discover problems and opportunities in your business. In either case, quick action is critical; hence the need for dashboard data that can be comprehended instantly.
3. A Solid Data Foundation
Each and every metric in your finance dashboard should be derived from quantifiable data you are monitoring. Your dashboard should be supported by detailed financial reports that can be quickly accessed when questions require a deeper inquiry in specific areas. For example, if your cash balance is projected to drop in 4 weeks, you should have the specific assumptions surrounding inflow and outflows that led to that projection.
4. Timeliness
Just as your car can overheat after 3 hours in bumper-to-bumper traffic on a hot summer day, your business is dynamic and subject to ongoing threats and opportunities. Your dashboard should be prepared at least monthly to ensure you are able to react to negative trends before they’ve taken their hit on your organization. You’ll also want to seize opportunities the moment they arise to maximize their potential. For example, if your dashboard monitors trends in revenue (or profit) by service offering, you’re much more likely to stem a sales decline or steer more sales and marketing efforts to double down on a more profitable line.
5. Tailor-Made
Your business isn’t generic and your finance dashboard should not be either. The key performance metrics it reports upon should be customized to your company, factoring in your industry, stage of growth, and short & long-term goals. Whether that means ensuring you have sufficient cash to afford that next hire or new technology investment, it should provide answers to the questions most pertinent to your current key decisions.
6. Highly Anticipatory
Your company and its market are dynamic, and both constantly evolve. Your finance dashboard should be adapted accordingly to ensure the metrics remain relevant. Ensure your team is adapting your reporting to remain a step ahead of your needs.
7. Highly Visual
The whole point of a finance dashboard is to reveal the metrics most important to you, at a glance. Its purpose is to fuel fast, efficient, and informed decisions. To achieve this, the data must be presented in a format that speaks to YOU, that is optimized for how YOU most readily consume data (likely some mix of visual graphs over tabular presentation). You don’t have time to analyze your dashboard, a finely tuned dashboard lets you grab the info you need and go.
8. Audience-Orientation
It is important to clearly identify your target audience for your financial dashboards and reports. They may be CFOs, VP Finance, Financial Manager, etc. Different people look for different kinds of information. For example, a CFO will need a high-level comprehensive summary of all financial systems and processes. On the other hand, a financial manager may be interested only in the department or project he is in charge of.
Maximizing the Benefits of Dashboarding in 2022
The key benefits of financial dashboarding are as follows:
- Collects and reports data from diverse data sources
- Provides an at-a-glance status of vital finance stats
- Provides a single point of information about business finances
- Simplifies and presents data visually
- Sends automatic alerts in case of issues
- Sends automated email reports to key stakeholders
- Can be accessed anywhere, anytime, on any device
Maximizing the aforementioned benefits not only requires an understanding of the 8 most important aspects of dashboarding but also access to technologies that further empower your finance team. Among these new technologies is FP&A software, which enables finance departments to capitalize on the 3rd and 7th benefits; you can share documents that can be updated in real-time and accessed by key members of the team. Doing this helps prevent multiple versions of the same document from being created as well as disparate information and feedback.
Keeping a dashboard up to date like this is the only way to ensure its relevance continues; it’s important for dashboards to be as automated as possible. This frees the finance team up from managing manual data dumps and re-keying so they can focus on using the information in the dashboard to drive the business instead. Finance professionals that want their organizations to remain relevant must adapt to the technological developments in their field, and seize this competitive advantage.
