Business owners have access to more financial and operational data than ever before. However, this creates the challenge of identifying which information is insightful and sharing it in a way that enables better decision making. A key tool that helps consolidate your key metrics into an easy to ready format that helps management monitor performance, identify trends, and respond more quickly to changing business conditions is dashboard reporting.

Focus On What Matters Most

Everything in a dashboard report can typically be found elsewhere in your financial reporting systems, albeit in a less user-friendly format. Rather than providing new information, a dashboard report captures the most critical data — based on the nature of your operations — and presents it clearly and succinctly.

A dashboard report may compare your results with budgets, prior periods, or industry benchmarks so you can see whether you’re falling short or exceeding expectations. It can also provide an early warning system for potential problems, allowing you to pivot as needed to lessen losses and capitalize on emerging opportunities before they pass.

To increase the effectiveness of dashboard reports, make them accessible to appropriate managers across your organization via your internal website or weekly email blasts. Widespread availability allows your management team to quickly identify trends that require immediate attention. In addition, businesses that are struggling during a reorganization or debt restructuring sometimes share selected dashboard reports with their lenders or investors to demonstrate performance and confirm compliance with financial expectations.

Choose Relevant Metrics

When deciding which information to target, look at your business’ loan covenants — lenders usually have a good sense of which metrics are worth monitoring. Then conduct your own risk assessment. What’s relevant varies depending on your industry, general economic conditions, and the nature of your business operations.

In addition to tracking cash balances and receipts, useful financial measures may include the following ratios:

• Gross margin [(revenue – cost of sales) /revenue]
• Current ratio (current assets / current liabilities)
• Interest coverage ratio (earnings before interest and taxes / interest expense)

 
From here, consider adding a handful of business- or industry-specific metrics. For example, a warehouse might report daily shipments and inventory turnover. A hotel might track net operating income, average room rates, and occupancy rates compared to the previous week or month. A law firm might report each partner’s realization rate. Retailers may focus on sales per square foot and average transaction value, while service businesses might track utilization rates and revenue per employee.

Avoid information overload, however. A limited number of well-defined metrics is generally more useful than a cluttered report that recreates the underlying financial statements. Review your dashboard metrics periodically as your business’s goals, risks, and operating conditions change.

Complement Rather Than Replace

While financial statements provide a comprehensive view of your business’ financial position and results, dashboard reports deliver timely insights that help management monitor day-to-day performance and respond quickly when conditions change. Contact us for help identifying key financial metrics and developing a dashboard report that’s tailored to your business.