Why financial dashboards matter
By: Dean Dorton | July 8, 2020
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If your organization has a reasonably functioning finance office, then you probably see monthly or quarterly financial reports weeks after close. Over the years producing financial reports has become standard protocol, but understanding the information and being able to make sound business decisions based on the data varies widely from company to company. Typically, organizations spend a large number of hours, many of which are painstaking manual processes, producing the numbers their organization wants to see but then the reports are not leveraged to advance internal strategic conversations or decisions.
What if this was not the normal? This is where customized dashboards (reports illustrating key pieces of data that matter most specifically to your company in graphic format) become a key differentiator for your business.
Graphs and visuals tell the whole story about why and how the numbers are interacting with each other. True analysis of financial data requires both numbers and words – but if you don’t understand the numbers, how will you ever put it into words? Normally organizations highlight significant variances like differences from budget but do not have the data behind why those changes exist that is easy to access. You may be able to make assumptions based on other happenings, but you do not have the capability to drill down into that exact line item and find the reason. A management team needs to truly see behind the bottom line numbers to explain changes to the board, stakeholders, and investors or donors and determine appropriate action. Visualizing the numbers and trends prompts more questions like:
- Why did our revenue decrease this month/quarter?
- Why did we bring in less revenue than predicted this month/quarter?
Questions typically prompt practical conversations, perhaps in this example of “We actually are a seasonally-based business. Should our revenue budget reflect this so we have a better understanding?”
Additionally, dashboards are one of the most effective tools for providing easy-to-read financial data that can be deciphered by board members. For example, nonprofit boards and even some for-profit boards are made up of a variety of professionals who all have various financial expertise; some may have years of experience serving in finance roles whereas others may be more involved in the social sector. Given the wide range of financial understanding, it is impossible to expect everyone at the table to understand a monthly or quarterly financial report or better yet an organization’s audit report.
Dashboards intertwine the numbers and the story. They create a common language between board members, which allows those inclined to dive into the financials and provides opportunity to communicate with others who don’t know the historical layout of the balance sheet and who are less interested in financial data. Dashboards also convey all the information that is expected – and imperative – to a board to provide governance and make decisions based on accurate data.
Developing dashboards may sound daunting but they are key in defining your future success and measuring accurately against your organization’s goals. Leaders of dynamic organizations are embracing every new technology that can help them get further, faster and when faced with time-sensitive decisions about things like employee headcount, supply chain issues, new products, marketing expenses. For nonprofits factors such as changes in funding, annual event goals, program changes, and partnerships are imperative to meeting their mission. Dashboards provide an easy-to-read common understanding of the organization’s priorities and measures of success.
By identifying your organization’s key performance indicators and using a concise reporting tool, leadership teams can make decisions quickly backed by the real-time data relevant to their success.
If any of the above sounds even vaguely familiar, consider adding a multi-dimensional dashboard tool for your organization.
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