So, you’ve been tasked with creating a dashboard for the Chief Financial Officer (CFO) of your company. How do you create one that will not only present the required KPIs in an effective way but, also allow the user to have all of the data that they need to make informed decisions based on those indicators?
In this article, we are going to touch on three of the core aspects to creating a dashboard that any CFO would love. This isn’t a definitive guide to creating ‘The Ultimate CFO Dashboard’. Rather, this article will help you to form a solid foundation on which you can introduce your own unique skills and business objectives. Let’s get started.
1. Start with the User
What does the CFO do?
To make an effective dashboard, we need to understand what the CFO is responsible for in an organization. Simply put, a CFO is responsible for understanding and accurately reporting on the financial well-being of the firm. They need to accurately assess the risk and liquidity, manage its capital structure (debt and equity), and make sound decisions for positioning the firm to take advantages of future opportunity. This is a very crude overview but you get the idea. As the title implies, the CFO cares about the finances.
2. Monitor Relevant Financial KPIs
What KPIs are CFOs are interested in?
Now that we know what the CFO cares about, what metrics can we deliver in our dashboard reports that will be meaningful to them? Below are 8 common KPIs that CFOs should have ready access to. Keep in mind that these can vary depending on industry and the nature of the firm’s business.
|Accounts Payable Turnover||Simply, how quickly a firm pays off its suppliers. The ratio indicates how many times a year the firm does this.||Accounts Payable Turnover = Total Supplier Purchases / Average Accounts Payable||Line chart with Time Dimension (Yearly, Quarterly, Monthly etc.) OR a table stating values and a net change indicator|
|Accounts Receivable Turnover||How quickly a firm converts its accounts receivables into cash.||Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable||Line chart with Time Dimension (Yearly, Quarterly, Monthly etc.) OR a table stating values and a net change indicator|
|Quick Ratio (Acid Test)||An indicator of the firm’s ability to meet its short-term liabilities. This measure differs from the Current Ratio in that it ignores illiquid assets. The formula may vary depending on the types of assets the firm controls.||(Cash + Accounts Receivable + Short-term Investments) / Current Liabilities.||A small table showing both Quick and Current Ratios, a progress indicator, and the stated target for each.|
|Current Ratio||Another indicator that measures a firm’s liquidity. Unlike the Quick Ratio, the Current Ratio considers all assets of the firm.||Current Ratio = Current Assets / Current Liabilities||Line chart with Time Dimension (Yearly, Quarterly, Monthly etc.) OR a table stating values and a net change indicator|
|Debt-to-Equity Ratio||The firm’s liabilities measured against the value of the stockholders equity. It demonstrates how much of the firm’s financing comes from investors and creditors.||Debt-to-Equity Ratio = Total Liabilities / Shareholders’ Equity Bar chart showing||Debt and Equity in separate bars according to time with Equity shown as a line spanning the chart|
|Working Capital||A ratio that demonstrates a firm’s ability to pay off its current liabilities with the assets that is currently has.||Working Capital = Current Assets / Current Liabilities||A bar chart displaying the breakdown of assets and liabilities over time with the working capital stated in dollar amount.|
|Finance Error Report||The percentage of financial reports that contained errors for a given time frame.||Finance Error Report = Error-Containing Reports / Total Reports Produced||A bar chart displaying the breakdown of assets and liabilities over time with the working capital stated in dollar amount.|
|Budget Variance||This is how much difference was there between the actual budget and the projected budget. This is often times broken down into smaller components to allow for the identification of troublesome areas.||Budget Variance = Projected Budget – Actual Budget||Waterfall or Gantt chart depicting Budget Variance according to company structure (i.e. Department or Region level)|
For most of these metrics, whether a value is ‘good or ‘bad’, is heavily dependent on industry and past performance. Also, these formulas are generalities. Some firms have specific methods for calculating these values. Be aware of this as you choose what KPIs to include in your dashboard.
3. Enable Interactive Data Exploration
Analysis Capabilities and Operational Reporting
In today’s world, we have the ability to share information on an unprecedented scale. Part of your job as BI Analysts is to provide that information in a manner that allows decision-makers to take informed action. Interactive dashboards for a CFO, or other upper-level management, need to have an analytical nature to them. Operational reporting is better suited to other managerial levels in the company that have the responsibility of running the day-to-day operations.
CFOs are concerned with high-level planning and orchestration of the entire firm. They ask and answer questions like, “Where are we headed as a business?”, “What do we like or not like about what this dashboard is telling us?”, and “Are we on track to meet our goals as a firm?” So, the data shown in the dashboard needs to provide them the ability to assess the firm’s progress towards those goals. Without the ability to see, and drill down into, macro-level metrics, and their projections, CFOs cannot understand the whole story that the KPIs are telling them.
4. Follow Effective Data Visualization and Dashboard Design Principles
Making the Relevant Information Pop
Now that we have an idea of what information we are presenting and who we are presenting it to, it’s time to actually start creating widgets and laying them out in dashboards. We’ve covered some standard best practices for ways to visualize data and dashboard design principles in the past, so feel free to consult these resources to find the best way to create an interactive data display which presents the relevant information without causing your CFO to experience sensory overload.
By understanding our user, the CFO, and their goals, we can provide meaningful KPIs in an effective visualization that provides them the level of operational and analytical reporting they need. Remember to keep in mind the metrics that are important for your CFO to achieve their goals for the firm as you select your KPIs. Present them in meaningful, easy-to-understand visualizations that allow for adequate analysis but the user. Hopefully, this article has helped you to get started creating an effective dashboard for your CFO.
Looking for a robust tool for financial data modeling and dashboarding? Check out Sisense BI for the finance sector. Just want to learn more? Check out our next blog post about BI and finance: Tips for Exploring Financial Data with Business Intelligence. To find out more about dashboard design, check out Six Questions to Ask Before Building a Dashboard.