NEWS AND RESOURCES

Tip of the Month for July 2015

TIP: Financial Dashboards to Better Manage Data

Regardless of your profession or vocation, there are probably times when you feel overwhelmed by the amount of information available to you. Living in an age when data is as accessible as your keyboard, tablet or smart phone, learning to manage data is often the key to success. The term “financial dashboard” was probably coined about 10 years ago, and since then has become a much-touted solution for business owners and individual investors who are keen to get a better grasp on important financial data. If you are interested in setting up a dashboard, here are some considerations to help you devise an effective model.

  1. What is a financial dashboard?
    It is a visual display of the most important information you need to achieve one or more objectives. A dashboard displays this key data on a single screen so you can review and monitor it at a glance. Depending on its goal(s), the dashboard may show sales results, cost of doing business, profit margins, performance of top performing stores/salespersons, etc. Dashboards can provide users with a range of information in one place, and can speed decision-making and improve overall growth/productivity. Some investors use them to track how their finances are faring – savings and investments, debt/mortgage reduction, 401(k) accounts, etc.
  2. Chose the right metrics
    It’s vital to include the metrics that are the most relevant and useful to your goals, and to be selective in determining which ones belong on the dashboard. For example, if you are in a highly competitive business sector and your goal is to grow the business without cutting into profit margins, you might wish to include data on return-on-investment (ROI) and include market share updates from a third-party provider, as well as track your new customers/orders, repeat business data, most profitable goods/services, and sales growth. Every item on the dashboard should support your goal(s) and be a leading indicator of progress toward that goal. Done properly, a financial dashboard will let your employees see how their respective goals play into the company’s overall business goals.
  3. Keep the graphics clear, simple, and readable
    It might be tempting to get creative with the visuals, but don’t. Make conservative use of different colors, shapes and lines to highlight bar graphs, heat maps and pie charts. The goal here is to make the graphics easy to read. Avoid clutter and the temptation to overdesign.
  4. Keep it up-to-date and accurate
    Determine the appropriate time frame for your dashboard updates – hourly, daily, weekly, monthly. This will depend on the nature of your business and the availability of accurate data. You might not need absolutely up-to-the minute data, but whatever is displayed must be sufficiently time sensitive to be genuinely useful for assessing whatever you have chosen to measure.
  5. Chose the best distribution for your needs
    Publishing to the web is perhaps the most common form of distribution when you are providing data for sharing and collaborating across your company. This allows dashboards to be easily updated and to ensure adherence to the IT protocols and Internet security policies you have established. If your distribution is small, you can post your dashboard files on your password-protected website. However, this method is more likely to create synchronization or security issues.

Many different people use financial dashboards for a variety of needs. They are a popular tool. If you decide to embark on designing one, keep it simple as well as easy to maintain and update.

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