With few exceptions, there’s a good chance every vehicle you’ve driven has come equipped with a dashboard, displaying everything from your automobile’s speed and fuel level to its engine temperature and RPMs. Without this display available, it would be extremely difficult to know how fast you’re traveling, whether your vehicle is in good condition or if you’re moments away from running out of gasoline.
In business, financial dashboards play a similar role to that of a vehicle’s dashboard. In effect, they enable CEOs, CFOs and accounting teams to have an overview of a company’s performance in real-time, which is an essential part of defining where exactly they should be steering their business efforts. For small businesses in particular, who rely on making swift financial decisions, these daily assessments give a much clearer day-to-day picture than monthly or quarterly reports, and are best leveraged in the development of new marketing and investment strategies.
For those who aren’t yet familiar with financial dashboards, here is a little more background.
When you’re building a financial dashboard, most financial advisors recommend having fewer than 10 categories set up for viewing company performance each day. There are currently a number of programs that can help you get set up, using data from spreadsheets and other accounting software to instantaneously display yearly, monthly and even daily financials in graphs and other visuals.
These financials, commonly described as key performance indicators (KPIs), measure how well a company is performing financially in a few key areas, which may include:
While these numbers are already significant month-over-month, they matter even more when they’re being scrutinized on a daily basis, offering early insight on upward or downward trends in the business and in the marketplace.
In April of this year, American Express touched on the subject of financial dashboards in an article that outlined their advantages. In the article, Jeff Cornwall, who serves as a professor of entrepreneurship at Belmont University, spoke to the need for financial dashboards in small businesses specifically, saying:
What you’re trying to do is constantly monitor the temperature of your business. If you have a good financial dashboard tied to the right numbers, it allows you to observe problems before you start losing money or losing customers.
At Evolution, we take business financials very seriously. It was selected as our first pillar for a fundamental reason, as we can’t emphasize enough the importance of identifying and monitoring key predictive financial metrics on a frequent basis to keep your finger on the pulse of your business.
Not only do financial dashboards minimize surprises, but they also help define measurements for success. As a precise and concise reporting tool, financial dashboards impress upon organizational leaders the need to make a choice: either to expand in areas of current growth or reduce investments in areas of weakness.
As an entrepreneur and small business owner, your company’s efficiency, growth, financial health and resilience are understandably important, making it equally important to consider using a dashboard to stay on top of your company’s finances. And then, once implemented, use this financial dashboard to change the way you do business – for the better.
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