Key Elements To Include In Your Financial Dashboard

by Wayne Richard / September 13, 2020

Guest Post by Wayne Richard from Bean Ninjas

One of the most important things you can do during a recession is to keep good financial records. In fact, the majority of sellers we recently surveyed that bring in more than $1M in revenue annually invest in cloud accounting software. In addition to helping  you identify cash flow issues sooner, keeping your financials current also helps with compliance issues such as sales tax accuracy.

Ecommerce companies - even those who pass on cloud accounting software in favor of their own bookkeeping - are more sophisticated than ever in how they keep financial records. A financial performance dashboard is indispensable in having a timely and accurate pulse on the financial health of your business. In this article, we will hit the high points of what to include in your dashboard.

What’s A Financial Performance Dashboard? 

It’s very common to get lost in all the data - dashboards help with that. 

A financial performance dashboard is a snapshot of the metrics that keep you up at night, which we have broken down below into categories of growth and operational. A sleekly designed financial dashboard helps you make faster and better business decisions.

This is something you can check on a daily or weekly basis. As such, it’s important to keep these numbers updated on an ongoing basis, which is one of the great aspects of having cloud accounting software, such as Xero, that can track and categorize transactions automatically.

If you’re not sure what you should be tracking, don’t have time to wade through spreadsheets, and don’t understand the financial reports you are currently receiving, then a financial dashboard can be an absolute game-changer for you. Here’s how to get started. 

How To Set Up A Financial Performance Dashboard 

A financial performance dashboard helps you visualize and gain a deeper understanding of your financials from a variety of angles including sales, marketing, product development, customer service, and employee/department contributions. By having your most important KPIs at the touch of your fingertips, you can more efficiently monitor sales, expenses and profitability as well as  keep your team accountable.

The key to a good financial performance dashboard is to put your most critical KPIs front and center and keep it simple.

In addition, there are many dashboard software platforms such as Google Data Studio, Tableau, Databox, and more - that allow you to automate much of this process. You can read more about financial performance dashboard optimization and automation here. 

Key Elements to Include

Growth Metrics  

Revenue 

This is the amount of money coming in from your goods or services. It’s easy to fall into the trap of only looking at this number, but it’s important to look at your marketing and operational costs as well. For example, one may see their revenue growth and assume all is well only to find later they actually are in trouble. 

Customer Acquisition Cost

This is the cost to acquire a new customer. This isn’t how much you spend on marketing, rather, it is how much you spend on one customer for them to convert. This will vary among your revenue sources and marketing channels, but tracking the average can give you a high-level pulse check. This KPI combined with average order value is especially valuable for deciding which customers to invest in and how.

Average Order Value

This is the  amount the average  customer spends when they buy from you. Identifying how much a customer is willing to spend can help inform future business decisions such as new product or service lines or adjustments to existing offerings. For example, those who provide subscription services may consider testing a one-time (and much higher) annual fee upfront versus a smaller monthly fee that could drop off at any time. If you receive a healthy amount of annual subscribers, that may be a signal for you to shift offerings. 

Customer Lifetime Value

This is how much a customer spends with you for their entire customer life cycle. Failing to take this number into account can lead to making short-sighted business decisions that are costly.  For example, you may think a particular marketing channel has a lower ROI than it actually does if you are only considering a single purchase within a month versus how much that customer spends during an entire year.

Operational Metrics 

Cost of Sales 

This is the cost of production, materials and inventory-related expenses. For example, neglecting to zone in on the impact of shipping costs per unit can have a negative consequence on your final profit. Such an oversight may lead to underestimating the storage needs of your inventory as well.

Contribution Margin 

This is selling cost minus cost per unit. This KPI zeroes in on the product only - how much money a single unit brought in minus how much it cost to make the unit. Even if you have a high number of sales of a particular unit, the cost of production has to be worth it to you. 

Profit Margin 

Profit margin is your revenue minus the cost of acquiring customers and operating your business. Unlike contribution margin, this KPI zooms out and considers all costs of the business such as marketing and labor. Tracking this number ensures you’re spending enough in the right places and that it’s paying off. 

Refund Rate

How often you are issuing refunds, exchanges and credit card chargebacks? When this number is too high, profit suffers and you get a false sense of how much you actually are converting. 

In recent years, the average return rate for eCommerce companies was 20%.

How Often Should You Review Your Dashboard? 

We recommend that you set up your dashboard to track these KPIs on a weekly or even daily basis. While higher-level reports such as cash flow forecasting and P&Ls are typically reviewed bi-weekly or monthly, 

Conclusion

Don’t be the guy or gal who only wakes up to check the revenue, then goes straight back to bed and rests easy. These are challenging times, and the sooner you can find inefficiencies and other breakdowns in your accounting the better. And if you need more help to get this done, Bean Ninjas is here to help assemble sparkling dashboards and explain them to you on a regular basis. 

ABOUT THE AUTHOR 

Wayne is a management accountant who forged a 15-year career with tech heavyweight Hewlett Packard. He is now the COO and resident eCommerce accounting expert at Bean Ninjas. When Wayne isn’t managing a global team and equipping eCommerce entrepreneurs with the financial tools they need to enjoy business success and lifestyle freedom, he’s being an everyday superhero to his wife and five children. 

 

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Wayne Richard

Wayne is a management accountant who forged a 15-year career with tech heavyweight Hewlett Packard. He is now the COO and resident eCommerce accounting expert at Bean Ninjas. When Wayne isn’t managing a global team and equipping eCommerce entrepreneurs with the financial tools they need to enjoy business success and lifestyle freedom, he’s being an everyday superhero to his wife and five children.