Using a Dashboard for the Metrics that Matter

January 11, 2018

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In my first article in this series, I talked about the “secret sauce” for turning your financial goals into reality in business.

  • Pick one to three financial goals that matter (this is generally a quarterly exercise)
  • Create frequent (daily, weekly) visibility into your progress (or lack of progress) so you can “course-correct” quickly
  • Use a simple dashboard or scorecard to put the numbers (including a visual representation of the numbers and the trend) in front of you that is faster than waiting on your monthly financial statements.

Let’s look at an example of a company that implemented this approach and how a simple, interactive dashboard helped them monitor the metrics that matter in their business.

Putting your finger on the pulse of the business

The company does project-based work for large companies. Their annual revenue target was just over $8 million. The owner was very involved in operations but less involved in the accounting side of the business. She wanted a quick and easy way to keep her finger on the pulse of the business (especially revenues and cash collected).

The company invoices its customers based on the progress of each project. Communication between operations and accounting is important to ensure invoices are prepared accurately and that they are sent to customers timely. Being slow in preparing invoices ultimately means the company is slow to get paid. Preparing invoices that are inaccurate or incomplete creates the same slow pay problem because customers either reject the invoices or require the company to get the invoice right before they will pay. So, both speed and accuracy in invoicing matters to cash flow.

80% of revenues are services and 20% is hardware and product. As is the case in many businesses, the company has to spend money providing services and products in advance of generating revenues (invoicing its customers). Then it waits another 30 to 50 days (sometimes longer) to be paid. Three to four months can easily go by between spending money on a customer project and being fully paid for the project.

As a result, accounts receivable is a sizeable (and very important) asset. And because some of the projects are large, having a receivable on even one project go bad could destroy profitability for the year.

The metrics that matter

We quickly determined that two things were very important to the owner.

First, hitting the revenue target is important. To hit the revenue target, they had to have a good process for preparing and sending invoices that were both accurate and timely based on the progress of each project.

Second, getting paid is important. Spending money on services and products in advance of invoicing a customer, then not getting paid, is the ticket to failure in business.

Based on those two factors, we created three metrics that we would monitor weekly.

  • Days Sales Outstanding (DSO) - DSO is the number of days of average sales sitting (and sometimes stuck) in accounts receivable. It is a fantastic metric for tracking how well you are collecting your accounts receivable.
  • Amount invoiced for the week – This number comes from the accounting system. It is the dollar amount of invoices prepared and sent to customers for the week. It will also include the weekly target number.
  • Cash collected for the week – This number also comes from the accounting system. It is the dollar amount of payments received on accounts receivable for the week. It will also include the weekly target number.

Here is the interactive dashboard we created to provide weekly visibility into the three metrics that matter.

You can also click here to see the dashboard (visual report).

How to use the dashboard/report

Here are some tips for using the dashboard shown above.

  • You can expand the size of the dashboard by clicking in the bottom right corner
  • Move between the five pages by clicking at the bottom center of the dashboard
  • Mouse over the visuals to get additional information about each metric for a specific time period
  • In the top right corner is a “slider” that you can use to change the time periods being presented (DSO does not move because it is a single point in time metric).

Here is a short video to show you some of the cool features of the dashboard shown above.

Sharing your dashboard and making it available on a phone

In my next article in this series, I will talk about making the dashboard shareable in the cloud with the ability to drill down into more detail in a simple and easy to use fashion. I’ll also show you how to make the dashboard available on mobile devices so insights are available anytime, anywhere, from any device.

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We’ll look at some cool features that you can use to manage and monitor your financial performance so you turn your most important financial goals into reality, and improve your cash flow in the process. 

Philip Campbell

Consultant, Author

Philip Campbell is a CPA, consultant, and author of the book A Quick Start Guide to Financial Forecasting: Discover the Secret to Driving Growth, Profitability, and Cash Flow Higher. This new book provides a straightforward, easy-to-understand guide to one of the most powerful financial tools in business: a reliable financial forecast. He is also the author of the book Never Run Out of Cash: The 10 Cash Flow Rules You Can’t Afford to Ignore. The book is a step-by-step guide for business owners and managers who want to better understand and manage their cash flow. Since 1990, Philip has served as a financial officer in a number of growing companies with revenues ranging from $5,000,000 million to over $1,000,000,000. He has been involved in the acquisition or sale of 33 companies (and counting) as well as an IPO on the New York Stock Exchange. Philip loves helping entrepreneurs and business owners think strategically about the financial side of their business. His consulting work is focused on providing the financial insights that leaders need to increase profits, improve cash flow, and enjoy the fruits of financial success in business. What really sets Philip apart from the average financial person you meet is his passion and excitement about helping entrepreneurs and CEOs take control of their cash flow. In fact, early on in his career, he focused and “preached” so much about the importance of cash flow that people now call him CASH. Philip is the founder of Financial Rhythm, a website devoted to people who are serious about creating financial health, wealth, and freedom in their business. If you're an entrepreneur or business owner, Financial Rhythm is a place to get simple, actionable strategies for creating a financial future that is bigger and brighter than your past. Philip lives in Austin, Texas. You can email Philip at pcampbell@pdq.net.
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