A Practical Guide to Building a Financial Dashboard

A financial dashboard is a powerful tool for presenting financial information to a specific audience. It is not just about data; it is about providing insights to support more informed decision-making. In this article, we will explore key considerations for creating an effective financial dashboard, including defining the dashboard’s purpose and intended audience, real-time vs. periodical reporting, dashboard’s presentation, and using the most relevant financial metrics or key performance indicators (KPIs).

Dashboard’s Purpose and Intended Audience: To create a meaningful financial dashboard, begin with the end in mind. Who is the audience? Whether it is your organization’s board of directors, investors, or internal management team, understanding your audience's needs and objectives is crucial. Additionally, what is the purpose of the dashboard? The purpose of the dashboard must align with the expectations of the dashboard’s audience. For instance, if dashboard users want to monitor an organization’s cash reserves, the approach a dashboard developer takes will be completely different from creating a financial dashboard for tracking organization’s revenues and expenses. Ultimately, this will guide you in choosing the most relevant financial statements as primary data sources for your dashboard.

Real-Time vs. Periodical Reporting: Real-time reporting is the gold standard for financial reporting. However, achieving real-time reporting can be complex and resource intensive. It typically involves a dashboard that is connected to a financial database, expensive subscriptions to accounting or financial applications, and a high level of technical expertise. For someone who is starting out, a simple tool like Excel is a more practical choice even though it does not provide real-time financial reporting (i.e. periodical reporting). As your reporting needs grow, you can consider transitioning to real-time reporting as your organization’s budget and resources permit.

Effective Presentation: Even with a simple tool like Excel, you have a plethora of built-in capabilities to create a highly informative dashboard. You can incorporate features such as a toggle for switching the dashboard‘s accounting periods, a button to select data for different forecasting scenarios, or a customized background image or theme. You can also use color indicators to alert users when a financial category hits a predefined target (for example, traffic light indicators). Despite all the advanced features available, however, it is the best practice to keep the dashboard simple and effective rather than complex and excessive. The main purpose of a dashboard after all is to help its audience make a better financial decision, and an overly crowded dashboard will not serve this purpose well.

Relevant Metrics: Financial metrics, also known as Key Performance Indicators (KPIs), are one of the most important components of a financial dashboard. They provide insights into your organization's financial performance at a point in time or over a period. The choice of financial indicators would depend on your organization's business model and the industry it operates in. For example, it is logical for a service-based nonprofit organization to focus on revenue and expense ratios rather than on inventory churn ratios, since inventory turnover is more relevant for product-based businesses, not service-driven organizations.

Why wait? Begin the journey of developing your financial dashboard today. You can start with a simple dashboard, and as you gather experience, refine it over time. Crafting an effective financial dashboard is not a one-time effort. Rather, it is an ongoing process of learning and continuous improvement. As you gain a deeper understanding of your audience's needs, you will make better choices about the tools and metrics needed to create an effective dashboard that will guide your audience in making better financial decisions for your organization.

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