What is a business dashboard and why do you need one? My client walked into our conference room carrying a box and said “I brought all of the info you needed”.
I looked at him with a blank stare and a question mark stamped to my forehead. “What is all of this”.
“The information you asked for.”
All I had asked for was a few key indicators. You know, basic financial information like:
- gross profit margin %
- operating profit margin %
- DSO – days sales outstanding or even a simple aging of accounts receivable
- cash available
and a couple of other numbers that were specific to his industry and his business.
He said that he asked his bookkeeper and this is what she gave him.
“Do you get all of these reports every month?” I asked.
“No. I don’t look at this stuff. I was getting it for you.”
“Then what do you look at to understand how your business is doing?” I inquired, trying to keep my tone calm.
“I just figure if I am busy and I have money in the bank account, then I am doing alright.”
As many times as I hear it I am always slightly concerned. It is common for small business owners to manage the health of their business this way.
You may do it to. Don’t worry, you aren’t alone.
Introducing the Business Dashboard
But I want to introduce you to the idea of a business dashboard. It isn’t complicated. It is some key business metrics for your business that you look at once a month, maybe weekly, if you can get the data.
Whether you collect the data manually on a yellow legal pad, or have an automated system that spits out the data, either will work.
The idea of a dashboard is to watch key numbers in your business that measure the health of your business and help you to see problems before they become a major issue.
What Type of Information Should Be On My Dashboard?
Here are a couple of examples:
Accounts Receivable – if you watch the aging of accounts receivable, (how long it takes your customers to pay) you can call to collect at the first signs of the invoice becoming past due. The older the outstanding invoice gets, the harder it is to collect. The sooner you collect the easier it is to pay your bills.
Revenue trends – if you compare revenues against last year and last month you can see if your sales are growing, flat or declining. The sooner you see your trend shift the sooner you can act on it. Revenues going up creates a positive energy and momentum. Revenues going down requires a change of some sort to stop the negative trend.
Gross Profit Margins – watching your margins monthly compared to year ago and last month is another key piece of information. It is also important to watch the margins by product or service category. You want to understand the line of products or services that is the most profitable and least profitable. Low margins could mean costs have gone up for some reason or that your pricing model is off. This may require some digging but getting to the bottom of low gross profit margins can bring more to your profit line than any other action step you can take.
There are many other indicators depending on the business. For us, as business coaches and consultants we still look at billable hours and we also watch our sales mix. The more sales that go towards outsourced services the lower our gross profit margins. Our sales may stay the same, but we are making less money. The opposite is true if we do all of the work in-house.
Creating the Right Dashboard for Your Business
Many businesses have similar key metrics as we discussed above, but all businesses also have their unique metrics that matters to them.
By creating the right dashboard for your business:
- you can keep a finger on the pulse of your business in just a short time each week or each month.
- you can focus your team, or yourself, to work on the areas that will make the biggest difference to the overall health of your business.
- you can keep the management of your business simple.
If you aren’t sure what you should be looking at or how to gather that information, call us, we can help you. We will help you to identify the key metrics that drive your business and find the best way for you to collect the information efficiently.Do you know what drives your business and why?