Understanding Dashboards
Understanding Dashboards: an increasing important tool in managing the growth and strategic planning of companies far and wide
By Tamara E. Holmes
In order to ensure a business is running smoothly, you’ve got to monitor a myriad of variables, such as sales figures, accounts payable and outstanding invoices.
One way to make this information easily accessible and simple to monitor is to put it on a dashboard—an up-to-date visual representation of the most important data you’re trying to track.
“A dashboard really gives you one-stop shopping in terms of the types of data that can track on a regular basis,” says Thomas Walker, product manager for Blackbaud, Inc., a Charleston, SC-based company that develops dashboard applications for nonprofits. “For example, maybe the executive director or CFO wants to keep track of what invoices are coming up to better manage payables. Or they want to keep track of who’s outstanding.”
Unlike spreadsheets, which require you to update information manually, dashboards can be configured to pull information automatically from various databases, so that an executive can quickly see the performance levels of different areas across the organization. This also cuts down on the chances of making mistakes since, “when you’re manipulating data, there’s the potential for error,” says
Dashboard automation also eliminates the need for stacks of paper reports. “They’re typically leading indicators rather than historic financial indicators. And they allow for creativity in the display,” says Steve Osborne, president of Mentor Plus, a Pleasanton, Calif., company that trains in the process of developing dashboards.
Customize Data
While dashboards allow you to view information at a glance, they also can be configured to allow you to drill down to more detailed data. With Blackbaud’s Financial Edge program, for example, “If you’re looking at an aged account payables and you notice a particular vendor is 90 days out, you can go directly through the dashboard to that vendor record and look at history,” says
It’s also possible to set up multiple dashboards, and to determine different visual displays. “You can have one that the comptroller looks at, and one that the executive director looks at,” says
Determine Variables
Learning to use the software is the easy part. In fact, it takes only about 20 to 30 minutes,
Often, companies make the mistake of monitoring metrics that are not related to their strategic goals, Osborne explains. “If you have a dashboard that’s displaying numbers that really don’t show you how you’re doing against your goals, then the dashboard is really meaningless,” he says.
In order to ensure the dashboard reflects strategic goals, it’s important to have buy-in from the company’s top levels. If top executives are not convinced of the need for a dashboard, the first step is to convince them otherwise.
“You can tell them, ‘Our business success is based on the decisions we make from today on, and for us to continue to make good business decisions we have to have up-to-date critical information. And that up-to-date critical information can be found on a dashboard,’” says Osborne.
The next step is to set up a meeting between key managers in order to determine top goals. “You start with what the company goals are and then work down through the business processes to come up with what the indicators should be,” says Osborne. “For example, if one of the company goals is to increase market share, then you should have quite a few indicators around the sales process and how clients are being attracted and retained.”
The meeting will also highlight the fact that dashboards are an excellent, easy-to-understand way to convey financial information to non-financial executives. “They let non-financial users realize they’ve got the power to go out and take a look at what’s going on,” says Osborne. “If they notice something, they can further investigate it instead of waiting for that data to be pushed out to them in the form of a report.”
Create An Action Plan
The job doesn’t end when the right variables are selected. In order for the tool to be effective, companies have to decide on plans of action as the monitoring progresses. And while it’s impossible to predict every scenario, it is possible to come up with a plan of action should variables fall below or exceed projections.
“You can have a dashboard with the right numbers, but if you don’t act on it nothing’s going to change,” says Osborne. “If the numbers don’t go the way you want them to, you’ve got to start looking at the processes involved and figure out, ‘How do we make them better?’”
The key to getting the most out of a dashboard is recognizing that, like the dashboard on a car, it is instrumental in ensuring the company enjoys a smooth ride. Without competent executives behind the wheel, and the right variables to monitor, however, a dashboard alone isn’t going to take the company very far at all.
Reprinted with permission from the Illinois CPA Society.
