Ultimately, it is up to the CFO to make sure that the financial information that is shared with other members of the Executive Management Team, the Board of Directors or the Private Equity Group accurately reflects the true health of the company and the performance of the company so that relevant strategic planning can be implemented. To help streamline the information and to have a more timely flow of information, many companies are using Dashboards with varying degrees of success and satisfaction.
A good dashboard delivers information in a customized manner that is tailored to the industry and the individual company. Effective dashboards all have the following characteristics: 1.) Includes meaningful key performance indicators; 2.) User friendly summaries that are timely and transparent so that management can be proactive instead of reactive in running the business; 3.) Allows management to use a collaborative approach to create best practices; 4.) Effectively and accurately tracks performance indicators, such as, profitability, backlog, cash flow requirements, inventory levels, receivables management, etc.
Some of the red flags of an ineffective dashboard are the following: 1.) Reams of data that provides minimal insight; 2.) Lack of ability for customization which is particularly a problem for businesses that have grown rapidly through acquisitions where each subsidiary is using a different system; 3.) Excessive readjustments to information, incomplete information or incorrect information that renders the reports minimally useful; 4.) Lack of buy in by management of the importance of assuring the information is entered in a timely manner. Most managers are expected to do more with less time and resources. They are forced to prioritize their work and filling in the information for the dashboard rarely makes it to the top of anyone’s list. This is particularly true of sales management which is typically paid on closing deals not on the amount of reports that are filled out. Getting buy in by others and showing them the value of participating is vital to gathering complete financial data.