The best practice financial model can quickly become a time-consuming and exhaustive experience. Sure the financial modelling professional must never skip corners, needs to have a strong attention to detail, and should provide adequate room for future business unit additions. But the best practice financial model must be wrapped up into a bit-size summary, which can be rapidly digested by time-poor corporate executives. The humble financial dashboard represents such a bite-size output to summarise the company’s financial performance, key drivers and deliver a high-level graphical or pictorial summary of a company.
The Dashboard must be high-level
Corporate executives should not be handed, unless they explicitly request it, detailed page upon page of financials or graphs. They will simply glaze over it. The Dashboard must present the income statement, cash flow statement and balance, and other key financial drivers or metrics over one to two pages. The addition of graphs or charts should represent another two to three pages, which the following animation demonstrates.
This may sound pedantic, but harmonising the colours or fonts of the financials and graphs to the corporate colours will greatly enhance the professional or cosmetic appeal to the executive. Remember your best practice financial model is in essence a marketing tool, whether it is to “sell” to internal stakeholders across the company for acceptance and roll-out (i.e. a strategic plan), or leveraged for external stakeholder use, such as a PowerPoint slide deck by corporate executives to source new capital.
Additionally, ensure the font types are consistent and bold in size; especially if it is assumed the dashboard will be placed in PowerPoint presentations to potential investors or on the corporate website. Ensure the deck is large enough to be read and understood by users. If you are applying corporate logos to the dashboard, make sure they are consistent in size and form.
Often there will be iterations of the financials under different scenarios, therefore ensure each dashboard, under each scenario, is uniform in appearance.
Short, sharp, concise and relevant
The dashboard must remain high-level and relevant, hence avoid repetition and this extends to similar financial indicators. If you are presenting Revenues and EBIT in separate graphs, is there really a need to add a third graph for Net Income? Keep the dashboard relevant and present the financial information in a logical and coherent structure.
Executives will always want to see key financial ratios such as working capital, asset turnover, interest coverage and return on capital. Again, avoid the use of complimentary or ratios that will only provide incremental added value.
Similarly, keep KPIs (key performance indicators) to a manageable scope and number. Financial model stakeholders often like to see relevant operational, economic and financial indicators, which provides some further surety and offers additional sense checks on the financial numbers calculated in the best practice financial model.
It is vital all features on the dashboard will be informative to stakeholders. Eliminate all irrelevant and superfluous data and information. Try to keep graphs clear and intuitive to the dashboard reader. Avoid the temptation to add too many financial metrics on the one graph; often it is wiser to merely expand a complex graph into two simpler graphs.
The value-add of executive, financial dashboards is often greatly understated. Often they can deliver the same level of information value to a busy executive, which reams of spreadsheets could otherwise do. The very essence of a dashboard is to deliver a high-level snapshot of a company’s financial performance and position. The dashboard must be cosmetically uniform in font, colours and form. Whilst the dashboards must be short, sharp, concise and relevant, in what they are presenting to the time-consuming corporate executive or stakeholder.