Finance Dashboard

8 metrics your finance dashboard must include

7 min read
Dave Robinson

When was the last time you jumped in the car to head for a new destination — without a GPS by your side? Does 10 years sound about right? Perhaps longer! Your GPS has become indispensable. It plots the fastest course and helps you steer clear of problem areas in the path ahead. And like that GPS leading you toward a destination, your finance dashboard should be considered indispensable.

Then why is it most small business owners still manage their businesses in the dark, without comparable guidance from their financial reporting?

Regardless of the reason, an owner without the timely, accurate, quickly consumable and actionable data — in a well-designed finance dashboard — is blowing a tremendous opportunity. In the worst case, they are jeopardizing their firm’s future. For example, flying blind during periods when cash is tight could risk insufficient funds to cover payroll. And in the best case, they’re leaving money on the table.

Maybe you’re thinking this is some serious financial kung fu for someone who’s just getting started, for example, with an eCommerce site they created with GoDaddy’s Online Store. Or maybe you just got your law firm online. In reality, the best time to start thinking about finances is at the start of your business venture.

8 metrics to include in a finance dashboard

In case you’re not sure what a dashboard looks and feels like, the concept springs life with this sample finance dashboard. This article, however, deals with the what — that is, what are the metrics that an indispensable finance dashboard must include?

  1. Budget-to-actual.

  2. Sales pipeline.

  3. Cash flow.

  4. Compare to the past.

  5. Peer benchmarks.

  6. Industry performance metrics.

  7. Long-term value drivers.

  8. Current initiatives.

While the details behind each metric can vary from business to business and industry to industry, the underlying value of these key metrics transcend all companies.

Finance Dashboard Metrics

1. Budget-to-actual

The budget-to-actual table (or graphic) illustrates how the business is performing relative to the goals you set and articulate in your budget or projections. This portion of the finance dashboard clearly shows where the business is ahead of plan, and where it’s falling short. Measuring monthly progress allows time for reacting to cost overruns or revenue shortfalls.

2. Sales pipeline

Some sort of leading-indicator sales metric is a must in your finance dashboard. While a breakdown of the sales pipeline or forecast might provide the right visibility for some businesses, other companies might find a book-to-bill report — covering total sales booked and orders invoiced during a period — adequate to gauge whether there’s sufficient backlog to hit growth goals. Either way, maintaining the discipline to closely monitor sales activity allows an owner to spot trends, good or bad, and respond as required.

3. Cash flow

Projecting cash flow — even six weeks out — can be invaluable in your finance dashboard, as it can ensure there are adequate resources when and where they’re required. Proactive cash management is often necessary, as cash availability grows thin during periods of cash-intensive growth or in a firm’s slow season.

As an example, let’s say a government customer is expected to be slow in paying its invoice. The projection warns of a resulting $35,000 shortfall when a bullet payment on a term loan is due next month.

With sufficient advanced warning, perhaps you could encourage handpicked customers to prepay through an early payment discount incentive. Another option might be selectively delaying payments of certain accounts payables — naturally, you’ll want to think through the ramifications — long enough to bridge the gap. Certainly, other cash-producing alternatives exist, but the trick is to have the systems that give you an early warning.

4. Compare to the past

Financial information for a specific time period, in isolation, isn’t particularly useful. But using your finance dashboard to compare results from a certain period to past performance can be particularly enlightening. Such a comparison provides a useful point of reference for an owner to assess costs and revenue trends. Imagine your Q3 operating margin was 20 percent. That figure, by itself, doesn’t mean much. But when the same period last year produced a 25-percent margin, an owner immediately starts asking pointed questions to determine what is driving the lower margin.

5. Peer benchmarks

Another useful tool in your finance dashboard can let you compare certain financial performance metrics against your competition.

It’s often helpful to compare gross margins to those of your market peers.

A lower gross margin relative to industry benchmarks, for example, might trigger an investigation that uncovers labor costs exceeding industry norms. This information sets an owner’s expectation regarding what’s attainable, while simultaneously focusing on where to invest precious time.

6. Industry performance metrics

Your finance dashboard should also include industry-specific KPIs (key performance indicators) used to measure financial performance. As an example, the SaaS (software-as-a-service) industry monitors subscription billing KPIs such as customer churn, acquisition cost and lifetime value.

When it comes to running a law practice, a managing partner might watch revenue by partner or service types by client — to illustrate a firm’s ability to cross sell. While these industry-specific metrics can dominate a finance dashboard, care should be taken to measure only those metrics that are relevant to your stage of growth.

7. Long-term value drivers

Regardless of long-term plans, it’s wise to maintain a bead on the market value of your business. For example, a managed service provider is often valued on a multiple of its monthly recurring revenue. Reporting on such a metric, and watching it evolve over time, is important for creating the type of value the market will ultimately reward.

Whether in fundraising mode, exploring a strategic partnership or contemplating an exit, you’ll find that capital sources, prospective partners and suitors will all want to understand the financial health of the business.

And they will often turn to a valuation metric as part of their due diligence.

8. Current Initiatives

It seems that every business owner has at least one pet project — or an initiative that parallels day-to-day operations. It’s important to quantitatively measure the performance of these initiatives with a finance dashboard. This lets you monitor progress, and it drives decisions behind resource allocation. After all, an owner should depend on more than gut instinct to decide whether to sunset a project or invest additional resources. Let’s say you want to experiment with a new variable compensation program for select employees. Using a graph to overlay that cohort’s variable month-to-month compensation on top of its productivity can show the correlation — or lack thereof — between the two.

Less is more, and be ready to adapt

It would be easy to rattle off 10 or 20 additional metrics, but that’s one of the challenges in building and maintaining a useful finance dashboard. Too much information can overwhelm a busy business owner. It’s necessary to experiment to find the right mix of metrics, as well as the right presentation for the metrics you include.

Embark on the dashboard-creation process with the understanding that it’s an iterative process. What works one quarter may not work the next. A finance dashboard must evolve to remain relevant. Stick with it because — just as your GPS warns you in advance of an upcoming turn — your finance dashboard will sound the alarm bells when a change in course is required. That’s when you’ll know when you got it right, for now.