I love talking with entrepreneurs and like to make a practice of asking them what metrics they find most important to watch in their companies. It’s surprising how often I hear: “I just keep an eye on the business bank account to make sure there’s money there.”
What’s interesting, and unfortunate about that is that your bank balance can really only tell you one thing—how much cash you have in the bank.
But what about all the other information you need to know about your company? Do you know if your products are profitable? Are you spending enough on marketing? Do you know if a cash crisis is looming a few months down the road?
If you don’t, then I’d like to share one of the most important tools for a growing business. A tool that will tell you the rest of your company’s story. The business dashboard.
What is a business dashboard?
A business dashboard is a simple, one-page graphical display of your most important business metrics. It’s an information management tool that is used to track KPIs (Key Performance Indicators), core metrics, and any other relevant data points for your business, departments, and projects. It’s designed to help you visualize complex sets of sales and expense data that can be referenced at any moment. No need to pull reports or make calculations.
Why create a business dashboard?
A good business dashboard is a lot like the dashboard in your car. While you’re driving, your car’s dashboard gives you an overview of the most important data you need to know in real-time—like how fast you’re going, if the engine temperature is O.K., and how much fuel you have left.
If you’re only watching your company’s bank balance, that’s a lot like only watching the “check engine” light while you’re driving and completely ignoring the speedometer and gas gauge. Maybe you’ll know you’re not in immediate danger, but you’re missing a lot of other important information, and that can get you into trouble.
This is why a good business dashboard (also called a “financial dashboard”) is so important for growing businesses. A simple dashboard that you feel comfortable reading will help you keep an eye on several key metrics at once, so you can focus on steering your company effectively.
Building and using a financial dashboard doesn’t have to be complicated—in fact, the best ones are the easiest ones to set up and read. Here are my top eight reasons why using a business dashboard will help your business thrive, and then I’ll share some tips for building your dashboard.
1. Develop good habits
It’s a statistic we live by here at Palo Alto Software: Businesses that check in with their numbers regularly are 30 percent more likely to grow.
Still, there’s no question that in the day-to-day rush of running a company, it’s not always easy to carve out that time. But if you have a concise, graphical dashboard that shows you the key metrics, a check-in can take as little as 15 minutes! You could get it done by waiting in line at the bank or grabbing a coffee with your financial advisor.
The simpler it is to check in with your data, the easier it will be to fit into your busy schedule, and the more often you’ll get it done. Just like keeping a good diet and exercising regularly, once you start the habit, it’s easy to get addicted. I guarantee that a good dashboard will start that habit for you.
2. Visible goals get everyone on the same page
Another idea we talk about a lot in our company is this: You can only be successful if you know what success looks like. You, as the owner, CEO, or another sort of manager, likely understand what success for your business is. You’ve probably even established goals and benchmarks with success and growth in mind.
That’s all great, but does your team know what success looks like? After all, growing a business is all about setting goals, and then tracking your progress toward those goals. If they don’t understand what those goals are and what metrics they need to be analyzing and tracking, how can they possibly help your business succeed?
As you’re setting up your financial dashboard, it’s a great time to review your business goals with your team. If everyone is operating from the same definition of success, then your whole team is equipped to make better business decisions in their various roles in the company. And you don’t have to teach your entire team how to read financial statements to achieve that goal!
Giving them access to a financial dashboard is one of the simplest ways I know to provide transparency and move forward faster.
3. Compare your forecasts to actual results
A good financial dashboard should compare two crucial streams of data:
- Your actual, real-time performance numbers
- Your business plan forecast
This comparison is powerful. After all, financial data without context doesn’t really tell you much. Your forecast represents what you’d hoped to accomplish—in essence, it tells you what success looks like. And then, your actuals tell you whether you were successful in reaching those goals. With a tool like LivePlan, you can even automate the process of bringing your forecasts up to date.
Incidentally, if you haven’t already developed a forecast for your business, now’s the time to do that. It’s important here to differentiate strategic forecasting from the typical annual budgeting process. When you’re building a dashboard for your business and you set revenue targets to reach, you’re building a strategic forecast. The annual budget is different—that’s more about setting spending boundaries.
Both are important but remember: Your forecast defines what success looks like.
If all of this talk of forecasting seems a little intimidating, consider working with an accountant or strategic advisor. We’ve got a directory of certified advisors who can help with both forecasting and setting up your business dashboard.
4. Graphs and visuals tell a quick and convincing story
If there’s one thing many of us entrepreneurs have in common, it’s that we didn’t go into business because of our love for spreadsheets and financial reports.
That’s completely fine because as it turns out, charts and graphs are significantly easier to interpret than numbers. Want an example?
Both of the images below represent the same data: Let’s say these are your company’s overall costs and expenses. Which image makes it easier to see what the top three are?
Graphical displays are great storytellers. They instantly show relative differences and trends that a simple spreadsheet just can’t show. They help you see the direction you are headed and encourage you to ask questions.
Which leads right into my next point…
5. Uncover the story behind your numbers
When a graph can show you exactly where your business isn’t meeting its goals, you’ll find it easy and very natural to explore why things are going that way. The data helps you find the rest of the story.
Here’s a great example—again, let’s say this dashboard chart is for your company. It’s showing actual revenue compared to your forecast over a six-month period:
Is this some kind of seasonal fluctuation? Well, we can see two more metrics at the top of the page that offers more of the story. Your actual revenue is right on track with the previous six months, and it’s actually 8 percent higher than this time last year.
So it’s not seasonal since this same dip didn’t happen last year at this time. This decline in sales is clearly a recent trend. Armed with that information, you can start looking around your operation for possible causes. Have you changed your pricing recently? Has a new competitor moved into your market? Has your marketing spending fallen off in the past few months?
The data showed you where the problem was, and then you were able to arrive easily at the right questions to ask. That’s a lot harder to do while staring at thousands of cells worth of data in spreadsheets.
Uncovering the story beneath your numbers is critical to understanding how your business can grow, whether the news is good or bad. If you’re beating your forecast, for example, and doing better than the same time last year, then maybe there are lessons to be learned from your latest marketing campaigns. If you’re not doing quite as well as planned, why? What could you do differently going forward?
If you’re regularly reviewing your financials, you’ll also be able to adjust your forecast in real-time. Sometimes goals you put together when you started your business end up being less-than-realistic later on. Sometimes, you’ll have the excellent problem of finding that you’re consistently crushing your initial goals, and it’s time for some more aggressive ones.
6. Stand out from most entrepreneurs
As I mentioned earlier, the sad reality is that not enough entrepreneurs review their key business numbers on a regular basis, let alone have a business dashboard. When you put together a solid dashboard, you gain an opportunity to stand out from the crowd, especially with your advisors and team members.
Instead of just providing the same old financial reports from your accounting system, offer a visual dashboard that will spark some group storytelling—which is to say, a conversation about how to improve the business.
Not only that, if you’re using your dashboard to revise your strategy on a regular basis, then you’re pivoting to more successful tactics faster than your competition. You can read more about this concept here.
7. Get out ahead of your board of directors or investors
Here’s another way you can set your company apart from the crowd: Use your dashboard to impress your board of directors and investors. They’ll be requesting monthly reports from you. You can instead, put together a financial dashboard ahead of time. This will provide them with a rich, easy-to-understand portrait of how your company is doing before they ask.
Believe me, that will set your company above others, develop a solid foundation of trust with these key advisors, and help cultivate more opportunities for you in the future. Not only that, the visual presentation of your data will encourage richer, more valuable discussions about where your company is headed.
Best of all, if you build your dashboard with an online tool like LivePlan, your board and investors will be able to log in and check on your performance whenever they want.
8. Save time
If you try to track your business with manual reporting, that can take a ton of time. There’s a greater chance that you’ll make mistakes, adding additional time on top of inputting the data for review. Plus, if it requires a lot of effort to locate and format the data, then there’s a good chance the reporting won’t get done at all.
But, if you can automate your financial dashboard so that data is imported right from your accounting system, you’ll save countless hours every month and get the information you need, just when you need it. If you’re going to build or buy a dashboard, make sure it’s as automated as possible.
How to build your own financial dashboard
Hopefully, by now you’re feeling excited about the possibilities of using a financial dashboard. Building one may seem like a daunting process, but it doesn’t have to be.
Here are a few tips to get you started, whether you use Excel or an online dashboard tool, like LivePlan.
Determine your most important metrics
When you’re setting up a financial dashboard for your business, the first step is to choose the performance indicators that you want to monitor.
Every business should track its cash, revenue, expenses, and profits. Beyond that, you’ll want to choose a group of additional metrics that are key to your business. Some of these you’ll review daily and others, less often.
12 to 15 key performance metrics is a good number to aim for. If that feels intimidating right now, don’t sweat it. Come up with a few, and you can always add more later.
Here’s a good rule for deciding whether to include a metric in your dashboard: If you won’t make a business decision based on this metric, then you probably don’t need to track it. We’ve offered some advice for choosing your key metrics here.
Once you know what you want to track, set goals for each metric. Depending on what you’re measuring, you might have a fixed target every month, or you might have different goals for different months. Remember, you’ve already done your general goal-setting work by building a forecast.
Now you can use that forecast to help you formulate more specific goals for these individual metrics. Do you plan to grow sales every month, for example? Then you might set some goals for the number of new customers you’ll gain each month, or the size of the average sale per customer each quarter.
This more focused goal setting is another opportunity to get your team all on the same page. It can be a great exercise to work on your targets together so that everyone feels ownership of the goals and how you arrived at them.
Design for action
Don’t put off launching your dashboard because it’s not as detailed as you want or you don’t quite understand all the metrics yet. It’s more important to start tracking than to track perfectly from the outset.
Try starting simply, with a pilot program. Pick a small set of the most important metrics, and track only those. Notice how being able to see these metrics in real-time affects your business. Later, once you have your habit firmly established, you can expand what you track and how you track it.
Think about what kind of reporting you need
As I mentioned earlier, with an online dashboard tool, you can share your data with others instantly by granting them login access. But there may be cases where it would be convenient to print dashboard reports to share, or maybe download a PDF file. Think about the kinds of outputs you might routinely need, and make sure the dashboard solution you use can provide them.
The key here is that a dashboard should make it easier to keep track of the most important metrics for your business. Reviewing your financials should be simple so you can spend more time developing strategies and tactics to help your business grow, and less time crunching numbers.
Test, evaluate, and revise
As you start to use your dashboard, you may begin to realize that not every metric, setting, and report is exactly what you need. Just like your forecasts, you should be looking for opportunities to test new metric integrations and evaluate if you and your team actually care about the results. With a dashboard, you can actively adjust and update what’s presented at any time.
For example, maybe you initially chose to track expenses at a broad level month to month. But as you review, you begin to realize that you’re spending more time going back into your expense reports to look at them by department. Rather than continuing this process, you can simply adjust your dashboard reporting to present your expense data in more detail.
On the flip side, maybe you went too granular with your sales reporting and are having difficulty looking at your performance from a broad level. Maybe you need to simply create a separate dashboard view that dives into your sales numbers while simplifying your general report.
Look to evaluate and refine your reporting over time. Some dashboard views may be necessary early on in the life of your business, but simply become redundant as you grow and stabilize. Don’t be afraid to make adjustments, and remember the dashboard is meant to be a tool for your business, so adjust it accordingly.
Stay on top of your business with a dashboard
Leveraging a business dashboard can give you the tools necessary to guide and grow your business. It can consolidate complicated assortments of data and turns it into easily digestible reports for you to gauge the health of your business. With the right manual build or software, you can then dive deeper into your financial statements directly from your dashboard.
This ensures that you’re always on top of your business performance, and able to make adjustments when necessary.
Editor’s note: This article was originally published in 2015. It was updated for 2021.