Los Angeles, CA (PRWEB) May 08, 2012
A financial dashboard is a series of numbers that business owners monitor on a periodic basis to judge the financial health and the performance of their business. It also helps them to keep team members focused on achieving company goals.
According to Dave Lavinsky, President and co-founder of leading entrepreneurial firm Growthink, Inc., the financial dashboard is essential to make business owners aware of what is going on in their business so that appropriate improvements can be made.
“You cannot improve what you cannot measure,” Lavinsky says. “You need to track your progress to make sure you are always getting closer to achieving your goals. Your financial dashboard allows you to achieve these two objectives.”
Lavinsky highlights the use of metrics known as Key Performance Indicators (KPIs) as being the key to a financial dashboard.
KPIs allow business owners to measure key areas of performance. According to Lavinsky, important KPIs to monitor include:
- New customers
- Press mentions
- Website visitors
- Products manufactured
- Cost of goods sold
To help entrepreneurs and business owners that have never maintained a financial dashboard to make use of performance metrics to enhance business success, Lavinsky as revealed his 5-step action plan:
Step 1: Determine which KPIs to include in the dashboard
“The first step is to choose the Key Performance Indicators to track,” says Lavinsky, whom at Growthink has helped thousands of entrepreneurs build successful businesses.
Lavinsky advices entrepreneurs to ask themselves two key questions:
1. “What KPIs would help you manage your business?”
2. “What metrics would you like to improve?”
Step 2: Decide how often to measure each of the KPIs
“You need to view all of your KPIs on a regular, periodic basis,” says Lavinsky. “But some KPIs need to be viewed daily, and for others, weekly or monthly may be more applicable.”
“For example, a KPI for your company may be how many outbound calls your sales team makes. You may want to measure this daily or weekly (you probably don't want to measure it only monthly, since if the numbers are too low, you want to correct the problem more quickly). Conversely, you may only need to measure your advertising expenses monthly.”
Step 3: Determine what to measure each of the KPIs against
According to Lavinsky, business owners need to determine what they will measure each KPI against.
“If today were May 12th and your monthly sales were $84,617, how could you tell if this was good or bad? That's why you need other figure(s) with which to compare your KPIs.”
Lavinsky suggests comparing these results (between May 1st and 12th) against figures such as:
- Previous month's results (e.g., April 1 - April 12)
- Current month projections (e.g., your forecast for May 1 - May 12)
- Last year's results (May 1 - May 12 of the previous year)
Step 4: Choose the program in which to maintain the Financial Dashboard
According to Lavinsky, the simplest program to use is spreadsheet program, Microsoft Excel.
“In Excel, you would simply list the KPIs in the first column and then the results in subsequent columns. In doing so, you might categorize the KPIs based on the frequency you update them, and make sure to show the relevant figures that you're comparing each KPI against.”
Lavinsky also suggests that Google Documents provides an effective alternative.
“Google Documents offers a spreadsheet program hosted online that multiple users can view and update at a time. This makes it easier to update and view the KPIs (and not have to deal with multiple documents being passed around),” he said.
As a third option, Lavinsky highlights the possibility of investing in customized software.
“Such software can often use APIs (application programming interfaces) that automatically pull figures from certain places (e.g., it automatically pulls your payroll figures from your payroll software; automatically pulls your revenue figures from you accounting software; etc.). Doing so simplifies and automates the process of maintaining your Financial Dashboard.”
Step 5: Determine who in the organization will maintain the Financial Dashboard
According to Lavinsky, “The final step is to choose the person who will be responsible for creating and/or updating your financial dashboard. Because it cannot be you.”
“While the financial dashboard will be invaluable to your company, the work involved in maintaining it is ‘data gathering’; important work, but not the $500/hour+ work that you need to be doing as a business owner, such as coming up with new marketing ideas, working on ideas to improve performance on each KPI, systematizing your business, and training people.”
Dave Lavinsky advises entrepreneurs and business owners to follow his 5 step financial dashboard action plan in order to allow methodical and successful business growth.
Growthink, Inc. is a leading provider of entrepreneurial consulting services. Growthink has also developed several training products and tools for entrepreneurs, including a business plan template, marketing plan template, and strategic plan template. To learn more about Growthink’s products and services, call 800-506-5728.