Quick! What was your highest operating expense last month? What was the percent change month-to-month? And how does that expense compare to the same month last year?
If you can’t answer those questions in just a minute or two, then you might want to consider the benefits of dashboards.
Dashboards: Beauty in Simplicity
The beauty of dashboards is that they allow you to quickly see the big picture without getting bogged down in the details. The best dashboards are:
Simple. Your dashboard should be a simple representation of high-level numbers. You shouldn’t need multiple advanced degrees to interpret the data, and you shouldn’t spend hours each week tweaking the dashboard to produce the information you need.
Real-time. Dashboards are only useful if they draw from a pool of comprehensive, up-to-date information. In other words, effective dashboards are byproducts of effective bookkeeping practices. If you’re still posting all your transactions at the end of the month (or worse, at the end of the year), then your dashboards will be useless most of the time.
Accessible. Your dashboard should be no more than a single click away. If you’re spending too much time clicking through multiple screens to find the metric you need, then the dashboard isn’t serving its purpose. A word of warning though: Resist the urge to study your dashboard every day. Instead, set a day each week (after all your data is updated) to review your financial metrics carefully.
Actionable. An effective dashboard is one that presents the few key pieces of information you need right now to move your business forward. The point is to visualize a select set of financial results to help you focus on areas that you have identified as key for your organization.
Select Strategic Metrics
What metrics do you need at your fingertips? It depends on the goals you have set for your business. For example:
- If your goal is to maintain cash reserves of $20,000, then you need to see that your current and expected future balances meet that minimum.
- If you plan a profitability increase over the prior year, your dashboard should give you an instant view of your gross margin dollars compared to your target.
- If your focus is on reducing specific operating expenses, then comparing year-to-date expenses for those particular items against prior year results would be a perfect quick-glance metric.
- If you sell goods, a visual representation of your gross margin by product line would give you an immediate snapshot to see if you are meeting expectations.
Like a vehicle’s dashboard, these high-level metrics give you an instant read on where your business is at and the direction it’s heading so that you can move your business forward. This at-a-glance information can help inform smart decision-making — but it doesn’t replace more detailed analysis. If something doesn’t look right, dig deeper to understand what the numbers are really telling you. For example, if your dashboard shows that your profitability has increased well beyond your expectations, then it’s time to celebrate, right? Hold your horses. What that result might be telling you is that some of your expenses have not yet been recorded. (Maybe you haven’t yet adopted a weekly accounting rhythm.)
Dashboards Enable Collaboration
Running a small business requires paying attention to a lot of moving parts. Don’t try to go it alone.
Hopefully, you’re already working with an accountant who is helping you stay on the right financial track. One of the benefits of many dashboarding tools (especially those that are integrated into your accounting software) is that they enable you and your advisors to collaborate in real time. So take advantage of this rich source of simple, real-time, accessible, and — most important — actionable data. Get on the phone with your accountant to talk about how you can move your business from here to a better tomorrow.