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05/18/2010

Entrepreneurial Tip Corner: Dashboards are Here to Stay


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DashboardIt is said that the eyes are the windows to the soul. I believe the corollary to that saying as it relates to businesses is that dashboards are the windows to the soul of a company. What are dashboards, why are they so important, and what insights can they provide about a particular business? A dashboard is simply a pictorial description of one or more attributes of an organization. It enables the reader to quickly evaluate the performance of a particular facet of the business. Dashboards take on many shapes, sizes, and varieties, but there are certain key elements that should always be present. 

First, a dashboard must be easy to read and understand. If it is not, key managers will simply not make the effort to read it. It also needs to be easily interpreted. Each dashboard should be suitably titled and include a legend for each measured attribute to maximize its clarity to management. These qualities are critical to assure that management can easily keep its finger on the pulse of the business. 

Dashboards must also be accurate and timely. Many software packages are capable of capturing, manipulating, and displaying data in dashboard form in real time. This real-time dashboard is the preferred type, as management decisions can be made in a timely fashion with all of the most current data readily available. If your accounting software package is not capable of such real-time capture, then you should strive to develop a regular set of dashboards, which are updated from various sources on a monthly basis. The dashboards do not need to be exotic charts and graphs. They can be as simple as Excel bar, line, or pie charts. 

How do you start this process? Since dashboards measure key attributes of a business, you will first need to define what those key attributes are. These are also known as key performance indicators (KPIs). Informative dashboards can be generated by comparing:

  • Monthly and year-to-date (YTD) revenues, expenses, and bottom line P&L against the same results from the prior year; 
  • Actual results against the budget for that month and YTD; 
  • YTD actual revenue and cost per employee versus the prior year’s actual revenue and cost per employee;
  • The budgeted revenue and cost per employee. 

These dashboards can be easily depicted as bar charts. Other useful dashboards might include pie charts segmenting revenues and expenses by type or functional area of the business or line charts consisting of data trends over multiple periods of time (months or years).

During the past few years, dashboards have become more popular and widely used. There are many dashboard solutions and providers from which to choose. The bottom line is: dashboards are here to stay and by embracing the use of dashboards for your organization, you will assure that you have the best information available prior to making any critical business decisions. You will also be keeping pace with your competitors, who are most likely employing this new technique as well.

–Michael Herz, CPA, MBA

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