Gaining Better Insight with a Financial Dashboard
Financial insight into your business can be organized in various ways. Many companies attempt to gain insight through complex spreadsheets that only experienced financial professionals can navigate.
Once a month, these spreadsheets are inserted into a presentation with annotations, forming the monthly management report. Besides spreadsheets, a company can utilize textual reports, scorecards, and visual analyses. However, this approach involves a lot of manual work, is highly prone to errors, and the data is at least a week old.
For small businesses or companies in a stable environment, this reporting method is fine. But for a scale-up, or in situations requiring quick responses to changes, dashboards are more effective.
What is a Dashboard?
There’s a saying, “a picture is worth a thousand words.” In the same vein, “one dashboard speaks louder than a thousand spreadsheets.” The strength of a dashboard lies in its visual presentation and the limitation to only the most relevant information.
A dashboard is defined as: “a real-time visual representation of the information needed to make decisions, all on one page.”
Think of it as a car’s dashboard. At a glance, you want to see your speed, RPM, fuel level, and often, key navigation information: how many meters till the next turn?
Characteristics of a dashboard include:
- It displays essential information needed for decision-making. Filtering and drill-down might be options, but aren’t initially necessary.
- Information is visualized in charts, tables, and scores.
- All visualizations are on one page, eliminating the need to scroll. Additional pages cover other topics or provide in-depth analysis.
- The dashboard automatically links to underlying systems and updates in real-time.
It’s important to conduct a thorough analysis of what information a dashboard should contain. After all, you’ll base future decisions on this information. Start with the current management report. Combining systems can also reveal new insights to include in the dashboard. The initial dashboard is created based on formulated information requirements. It often requires several updates until it fully meets the user’s needs.
There are many types of financial dashboards. The best choice depends on the company’s typology, like SaaS, consultancy, or trade. Below are five key dashboards for scale-ups:
A) Financials Dashboard: Provides insights into the profit & loss statement, running forecast, balance, cash flow, and related KPIs, compared with the budget and previous periods.
B) Sales Pipeline Dashboard: Shows win/loss ratio, targets, and weighted revenue expectations.
C) Projects & Hours Dashboard: Offers insights into the result (revenue and margin) per project and employee hours (billability).
D) SaaS/Platform Metrics Dashboard: Displays KPIs such as MRR, CLTV, CAC, and cohort analyses.
E) R&D Projects Dashboard: Provides insight into investment, duration, and ROI.
Who Needs a Dashboard?
Dashboards are not just for leadership but can be implemented across the organization. For example, a sales pipeline dashboard used in weekly sales meetings, or an operational tool like a screen in the complaints department showing the number of complaints, handling time, and customer feedback score compared to targets and the previous week.
Creating a Dashboard
Dashboards are created using business intelligence (BI) software like Google Data Studio, Power BI, Looker, or Tableau. These tools can connect to various data sources, such as a transactional database, accounting software, or CRM system. It’s important to define business logic, i.e., how different data points relate to each other to create meaningful overviews and KPIs. Finally, these metrics are visualized in charts and diagrams.
The architecture can be summarized as follows:
This indicates the need for a data specialist or a financial professional with the right skills to set it up.
Without an underlying story, raw numbers don’t mean much. Ultimately, dashboards should lead to insight and action. Data can be used to tell a story, known as ‘data storytelling.’ The right display can reveal insights that would otherwise go unnoticed and, more importantly, convince dashboard users that certain actions can lead to change.
Tips & tricks
- Keep the dashboard as simple as possible with only the essential information. Too much information can make it less effective.
- The dashboard’s target audience should use it regularly (at least weekly), like using the sales dashboard for weekly sales meetings.
- You don’t have to reinvent the wheel. There are many templates available.
- Don’t underestimate the technical challenges of relying on dashboards in an organization. Set up your system early to ensure scalability and long-term functionality.
- Data is never perfect. You can’t always expect figures to be exact down to the decimal. Critical thinking is important, but action is more important than perfection when it comes to dashboards.
- Integrating multiple sources can be challenging. This often requires extra work from system users (like CRM and accounting). Investing in solid automatic integrations is often more than worthwhile.
For rapidly changing environments, such as in a scale-up, financial dashboards are essential. A dashboard provides real-time access to vital information for decision-making. With the right assistance, dashboards can be set up relatively quickly, freeing up time to invest back into the business.