Our View from

Canal Street

Our View from

Canal Street

Should You Have a Financial Dashboard?

by | Aug 31, 2023 | Accounting, Accounting Software

Your car’s dashboard is specifically designed to focus on the key inputs you need to drive safely. A quick glance is all you need to check your fuel gauge, speed limit, engine temperature, and RPM, the key performance indicators (KPIs) that provide you with a summary status of your vehicle’s operations.

In your business, current status alone will never give you the strategic insights necessary for successful management and planning. Your financial dashboard requires customization based on your future goals, and may include KPIs such as cash balances, aging accounts receivables, forecasted revenue, and MTD and YTD performance compared to plan and prior year same periods. These indicators will afford you historical perspective as well as facilitate forecasting of cash flow and future demand, essential tools for any business owner. There are many variables to monitor that are not typically derivable from financial statements that are useful to monitor and manage the health of your business.

The reality is the key performance indicators for your business differ from those of another business. That is where a customized dashboard is most beneficial for you so you can identify the KPIs that are most important to you and have that dashboard to glance at, allowing you to quickly assess your operations. Often, like your vehicle’s dashboard, color coding makes it easy to identify warnings so you can focus your attention accordingly and make informed decisions to address the root cause.

Here are 4 steps to create a financial dashboard for your business:

  1. Identify the KPIs you want to track. We suggest you start with 8-10 performance indicators.
  2. Select a tool that will provide you with the KPIs in the format you desire. Evaluate whether your current accounting system can present the KPIs you have identified with the flexibility of adding customized fields. This is the best option if available given the underlying data is likely already in your accounting system. Ideally, the system will enable useful formatting including charts, graphs, dashboards, and reports. Software plug-ins are another option to integrate with your accounting system.
  3. Create any new processes to calculate the new KPIs and get them integrated into the dashboard application.
  4. Hold a review meeting to review the initial set of defined KPIs. Incorporate monitoring of the dashboard as an ongoing responsibility of select management to ensure accountability for monitoring and taking action.

At LCW CPAs, we are committed to helping our clients reach their goals and that includes helping business owners identify the key performance indicators for their business and assisting them in putting a financial dashboard in place. Information is power and a financial dashboard is an essential tool for a business owner. Leveraging technology to help you manage your business is an enabler to growth and scale and when used properly, a financial dashboard provides you early indicators of both opportunities and issues in advance of a crisis.

If you are outgrowing your accounting system, we also offer Accounting Systems consulting services to help our clients through the evaluation and customization process.

Contact us any time to discuss the possibilities of establishing a financial dashboard for your business.