What is a dashboard?
A dashboard is a tool that can provide you with a quick and easy snapshot of your financial standing. It's a crucial part of any financial framework.
It can help you develop good financial habits, save time, and make informed decisions for your business.
This blog post will discuss the benefits of using a dashboard and how to interpret the data.
So, whether you're just starting out or a seasoned business owner, this post is for you.
Get ready to learn how a dashboard can transform how you manage your finances and take your business to the next level.
Why Do you Need a Dashboard?
A dashboard is like your financial assistant! It's a tool that provides a snapshot of your financial status in one place, saving you time and hassle.
Having a dashboard helps you develop the habit of regularly checking your financial information. Weekly checking can keep you updated on finances and create a good routine.
A well-structured dashboard should summarize your financial standing, making it easy to review and stay consistent over time.
It can also help you look ahead by projecting your finances for the coming month, so you can identify any necessary behavior changes and adjust your strategy accordingly.
Say goodbye to the headache of juggling multiple financial reports, and let your dashboard do the work for you!
A productive dashboard can save you time by focusing on critical items. This simplifies the process and allows you to easily make informed decisions without spending hours analyzing financial reports.
Dashboards provide real-time numbers at your fingertips, so you don't have to wait until the end of the month or quarter to see where you stand financially. Having a dashboard in place gives you a roadmap to a successful business and the ability to be on top of your game.
A dashboard can also validate your time and energy to those around you, including family members and loved ones. By setting intentions and goals for your business and using your dashboard to track progress, you can confidently communicate your progress and alleviate guilt and second-guessing about the time you're putting into your business.
Types of dashboards
There are different types of dashboards, and it's important to clarify which type we're discussing.
The dashboard we're focusing on today is the Financial Dashboard, which provides a snapshot of your financial standing on a weekly basis.
Your money team should provide the dashboard, which should remain consistent on a weekly basis and year over year.
On the other hand, there are also operational and strategic dashboards, which can change over time and serve as a scorecard to track progress toward specific goals.
These dashboards may include key performance indicators, project management goals, and team initiatives.
It's important to understand the difference between these types of dashboards and to use them in conjunction with one another to effectively manage your business.
Having a Financial Dashboard in place lets you track your financial progress and make informed decisions based on real-time data.
Additionally, by having an operational or strategic dashboard, you can track progress toward specific goals and ensure that your team is aligned with your overall vision for the business.
The Financial Dashboard covers several key metrics that are critical for any business to track, including:
- Accounts receivable
- Accounts payable
And this is the data you get from them:
Sales are compared month-to-date to the budget or financial goal for the month and to the prior year or period.
Cash includes all cash, checking accounts, savings accounts, and tax savings (if applicable).
The true cash balance is calculated by subtracting three months' worth of operating expenses and debt payments from the current cash balance.
Accounts receivable shows who owes the business money for the next 30 days.
Accounts payable shows who the business owes money to for the next 30 days.
Interpreting the data
Asking the right questions is key to understanding and interpreting the data on your financial dashboard.
It is important to ask these questions to your money team or a trusted person who can help you understand and interpret the data.
Some questions you might ask include the following:
- How can I increase my cash flow?
- What is causing my cash balance to dip or increase?
- What is driving my sales?
- Are there any trends or patterns that I should be aware of?
- How can I improve my profitability?
It is also important to ask follow-up questions and to ask the same question in different ways if you are not getting the answers you need.
For example, if you ask why your cash balance is low, and the answer is that you have a lot of accounts payable, you might ask how you can delay paying your vendors or negotiate payment terms to improve your cash flow.
Another helpful approach is to compare your current financial data with past data. This will allow you to identify trends and patterns that can inform your decision-making process.
For instance, if your cash balance was high six weeks ago, reflect on what happened during that time that led to the high balance. You may find that certain business decisions or strategies were successful, and you can replicate them to improve your financial health in the future.
Tips to get started with your dashboard
Creating a financial dashboard can be an intimidating task, but here are some tips to get started:
- Reframe your thinking: Instead of being overwhelmed by the numbers and feeling like you don't understand them, try to see the dashboard as a tool that can empower you to make informed decisions about your business.
- Ask for help: Don't be afraid to reach out to a financial professional, bookkeeper, or accountant if you're unsure of how to interpret the data.
- Combine with other data points: While a dashboard provides valuable information about your financial health, it's important to combine this information with other data points to make informed decisions. For example, consider market trends, customer feedback, or employee morale when making decisions about your business.
In conclusion, a financial dashboard is a powerful tool for business owners to gain insight, make informed decisions, and enjoy the journey of running a successful business. By following these tips, you can create an effective dashboard you'll want to use regularly.