Toucan Toco is now three years old, and I would like to revisit the mission statement : to equip the novice user with a tool that lets him/her easily access company performance data. One of the first observations that we ...
In most companies nowadays, communications are fragmented : financial communications for investors, Taking into consideration new accounting standards, Supervision of management functions, Accounting and Finance…
More and more financial administrations are now considering the possibility of a unified reporting, and the financial dashboard appears to be, and has become the main tool in support of decision-making. Here are some rules you need to know in order to build quality financial dashboards.
Understanding the user’s need before starting
Before you start, it is important for you to know the nature of your business or enterprise, the market on which it operates, and especially, the need of the end user. To be able to script the data – essential step to giving life to your financial reporting, you must know the context of the use. Each company or financial business has a unique and particular use of its data.
Focusing therefore on jobs or trades helps to identify the most important data : main sources of company revenue (per product, per region, per distribution channel, etc.), main sources of company’s costs (fixed costs; variable costs in value or percentage, etc.), key resources of the company…
There is no standard dashboard in finance. Each department, profession, industry has its particular sets of codes, and this plurality is what requires a higher level of personalization.
A financial dashboard should be not exhaustive !
The risk of sinking in the mass of financial information is one of the first pitfalls encountered when developing a financial reporting dashboard. One of the ways to bypass or distort such is by focusing on the available information at the right time.
Another way is by prioritizing your indicators, or KPIs, by significance or relevance. One motto : get straight to the point. Remember that a financial dashboard has two functions : to serve decision-making and to allow communication to its managers or team. It is counter intuitive, financial dashboard makers are usually afraid to forget crucial data. However, nobody wants and can follow a company’s activity, with 20 indicators.
Léonard De Vinci wrote : “Simplicity is the ultimate sophistication”. A clear visualization allows the audience to focus on data, rather than deciphering a slide. A successful presentation is therefore a strong message, contextualized and supported by its data.
Choosing performance indicators that tell a story
How do you choose your financial or economic indicators ? First of all, ask yourself this question : What is your objective through developing a financial dashboard ? Is it to support the management of a particular project, to have an analytical look at the company’s activity (management control dashboard), or, quite simply, to have a vision on key financial indicators at a “t” moment ?
New technologies in Data Visualization can generate interactive dashboards and graphs with captivating designs. Dataviz makes it easy to navigate from one piece of information to another, while processing extremely important databases.
During a presentation, the goal is not simply to state its results, but to offer an overview of its activity. To do that, it is important you dive into granularity and understand the reasons of a specific fluctuation or variation. In order to allow an audience to understand the presented data, an educational effort has to be made to contextualize them. It is called Data Storytelling.
Each KPI tells a story about the business activity. Whether it is in HR on workforce evolution, or in finance in the understanding of the balance sheet, each data carries a message. Confucius once said : « a picture is worth a thousand words ». Each graphic must have a clear and precise message, to facilitate the understanding of complex information.
A dashboard is an evolving tool
Your financial reporting dashboard is not an end in itself. Think of it as a step in a decision process. Therefore, it is absolutely necessary to periodically update it and refine its relevance.
This will enable the company’s decision makers to adjust decision cycles on the dashboard pace of publication and make it a real instrument for steering the company’s performance.
Your environment, your projects, your objectives and your constraints evolve, and a good dashboard accompanies such evolution, if it does not lead it. It is therefore necessary to always check and ensure that your dashboard includes indicators that correspond to your needs, and that urge your teams to act. An indicator that does not trigger any action in case of sudden change is a bad one.
An indicator for a screen
The easier data are to read, the faster their understanding will be, and decision-making will then be facilitated. Additionally, readers are not always familiar with the format of data presented to them. It is therefore important to make the information as accessible as possible.
A graphic must carry a single message. Too often, dashboards present dozens of indicators and graphs that loose audience. Do not accumulate your graphs. Present an idea, a visualization for a screen. Unwind your ideas on several slides.
As you may have understood, developing an effective financial dashboard does not amount to condensing the maximum technical information in the shortest possible support, rather, it amounts to making the information understandable, to the greatest number. Select the most relevant information and put yourself in the shoes of your reader. The dashboard must speak for itself. If you can send it out to the recipient without commenting on it, then, you have successfully completed the exercise !
Charles Miglietti, Co-founder @Toucan Toco.