Performance Dashboards: Financial Measures

Performance dashboards are a commonly used management tool to improve corporate performance.  Stephen Few, a business intelligence guru defines dashboards as “a visual display of the most important information needed to achieve one or more objectives; consolidated and arranged on a single screen so the information can be monitored at a glance.”  While this sounds good in theory, how can a small business use dashboards to drive a more profitable operation?  What specific items should be monitored? 

Cash Flow and Profitability

“Profit is illusion, cash flow if fact.”  The old adage clearly identifies the most important criteria in constructing a small business dashboard.  There are many ways to measure cash flow and in each business the important measures will be different.  One fact cannot be over emphasized in a small business setting: cash is king. When you run out of cash, you’re out of business. We should measure profitability, too…right?

Businesses need both profitability and cash flow to be successful over time. So you should consider both these measures. Maybe you can compromise and measure EBITDA, a sort of hybrid of both. If you can only measure one, measure cash flow.  As a business owner, you should be focused on cash flow already. In fact, your primary concern as business owner is to know how much cash you have in the bank, how much cash is coming in over the next few days or weeks, and how much cash you’ll have to use over the same time period. It’s up to you to manage that. You can have accountants who do calculations for and make accounting entries for you, but don’t turn over this job to your accountant. It is fine to have both of you focusing on this, but don’t turn this job over to your accountant. You are the only one who cares enough about your business to have this job.

Within the cash flow and profitability section, here are some potential measurement ideas.

• Bank Cash Balance
• Operating Cash Flow
• Cash Conversion Cycle
• Days Sales Outstanding
• Days Cash on Hand
• Gross Profit Margin
• Operating Profit Margin
• Net Income Percentage
• Return on Assets
• Debt Coverage Ratio
• Product Line/Category Profitability
• Division Profitability
• Plant Return on Investment

Do you have other financial related measures that small business owners should measure?

Leave a comment with your suggestions. If you need help setting up performance dashboards for your business, give us a call.


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