Flash Reports Definition
The Flash Report or financial dashboard report is defined as a periodic snapshot of key financial and operational data. It's a one-page report that helps management assess the key performance indicators of the company. The flash report should cover the shortest time period that is feasible, usually a weekly basis. The whole process should be based on the KISS principle (Keep It Simple Stupid) and should not take any longer than 30 minutes to prepare and get ready. If it takes any longer than that, then the flash report is too detailed and will be too difficult to maintain!
There are 3 sections to the flash report: Liquidity, Productivity and Profitability.
Flash Reports are a rough measure of change. They are not meant to be 100% accurate. If the data is 80-90% accurate, it will be enough to manage the business. For complete accuracy, the firm can defer to its monthly financial statements, which come out 2-4 weeks after the month closes. For management purposes, it is timeliness and "mostly accurate" is good enough. If one were to wait for complete accuracy, the competitive landscape may have change so completely that the "accurate" financial statements may not be of any use.
Flash reports should be done on a weekly basis. However, some companies elect to do it every two weeks in order to more naturally capture the payroll cycle in terms of monitoring cash flow.
The CFO/Controller should get together with the Owner(s)/Management to arrive at a set of metrics for the Productivity Section. This is the hardest part to arrive at and will require the input of both operations as well as finance/accounting.
After the initial metrics have been determined, the CFO/Controller can have someone in the client's accounting staff to gather the data for the Liquidity, Productivity and Profitability sections.
Each section tells a different story about the firm.
The Liquidity Section tells management about the cash situation of the firm. Is the company generating cash? Does it have enough money to pay the bills?
The Productivity Section gives an indication of the key performance metrics of the business. These metrics are tied to operations and are a way to combine the operations of a company to its financial performance.
The Profitability Section gives a rough indication of how much money the company has made during the period of measure. It is important to emphasize again that complete accuracy is not necessary. Timeliness, however, is. Management can work off of 80-90% accuracy. What they need to focus on is the change in trends over a period of time.
Flash Reports:Liquidity Section
The purpose of the Liquidity Section is to measure the change in working capital of the company. In so doing, the company will have a rough estimate of whether or not they can pay the bills and how much money they will have left over.
Monitoring the company's working capital over time will allow the firm to see: how cash increases/decreases, any effects of seasonality and effects of management decisions. If a company is making a profit then the Working Capital should increase over time!
As part of the overall Flash Report, the Liquidity Section ought to be monitored and reported on a periodic basis. What is that period? It is recommended that the entire Flash Report at a minimum be reviewed on a weekly basis. The more management reviews the information, the faster they can respond to crises.
The frequency of monitoring depends on several factors: Availability and commitment of the management team to review the information, Frequency of certain cash inflows/outflows (i.e. payroll), Ease of access and/or generation of information and Timeliness of data entry of information pertaining to this section (i.e. are all A/R and Inventory entered into the system on a timely basis?).
Someone in accounting, preferably a person who is in charge of bookkeeping.
Information for the Liquidity Section can be found in the Balance Sheet section of the company's financial statements (so long as it is updated). If the firm uses a software program (i.e. PeachTree, QuickBooks, Great Plains, etc) to manage its books, then the information can be easily retrieved.
NOTE: Make sure that the ending period on the Balance Sheet matches that of the Flash Report. Both are snapshots of the company in time. Make sure we are talking about the same time period!!!
Cash: Look in the check register to see how much cash is there. Do not use the bank balance because there may still be outstanding checks. Be leery of using the cash position off of the balance sheet. The information is good only if it is updated. This may not always be the case. This is why the check register is bes
Accounts Receivable: Look at the Accounts Receivable detail report for total accounts receivable. Deduct any bad debts reserved.
Inventory: Look at the inventory detail report for total inventory on hand.
Accounts Payable: Look at the Accounts Payable detail report for total accounts payable.
Working Capital: Sum up the values for Cash, Accounts Receivable, and Inventory. Subtract the value of Accounts Payable. This will give you the value for working capital.
Review and monitor your results. Graphing the results may also be a very effective method to see what is going on in your company's process.
In the spirit of flexibility, the Flash Report can and ought to be customized to fit each company's needs. The basic format is just that….a basic platform to help get you started. For the Liquidity Section, some companies have also added the following items:
Cash Receipts - This gives a feel for the cash that has come in during the period of concern.
Cash Disbursements - This gives a feel for the cash that has gone out during the period of concern.
Taken together, The Cash Receipts and Cash Disbursements give an indication of whether the cash flow for the firm is positive or negative.
Days Sales Outstanding (DSO)
DSO= 365 x Average A/R / Total Credit Sales
This tells you how many days it takes on average to collect on A/P.
Days Payable Outstanding (DPO)
DPO= 365 x Average A/P / Total Annual Purchases
This tells you how many days it takes on average to pay your liabilities
Days Inventory Outstanding (DIO)
DIO= 365 x Average Inventory / Cost of Goods Sold
This tells you how many days it takes on average it takes to turnover your inventory Cash Conversion Cycle (CCC)
CCC= DSO + DIO - DPO
This tells you how many days it takes to convert raw material to cash
Flash Reports:Productivity Section
A major issue that businesses of all sizes face is the inability for the Operations people to connect with the Finance/Accounting people and vice versa. The Productivity Section seeks to address this disconnect by measuring and tracking certain metrics that both Finance/Accounting and Operations can agree upon. By identifying and monitoring these non-accounting metrics, management can now manage the productivity of the company in a more meaningful way.
How do you get these metrics? An important by-product of this process is the communication process that both Finance/Accounting and Operations must have with one another. In essence, coming up with these metrics forces each party to “stand in the other person’s shoes.” In so many ways, this section is the most difficult to create, but it is by far the most powerful section.
For companies that have multiple profit centers, it may be worthwhile to have the key performance metrics grouped by profit centers.
The CFO/Controller sets it up. Then someone in the accounting department inputs the information into the template. The majority of the metrics should be formulas.
Since the goal is to tie operations to financial numbers, it is important to come up with operational metrics that will have significant impact on the financial performance of the company.
Step 1 - It is important for both the operations and financial departments to both grasp the general economics of the firm. Some key questions to ask are: What are the key drivers of the business? What/Where is the process bottleneck? How can we measure the bottleneck? What are the unit economics of the business? What is the breakeven point for the business? Note: Breakeven may be done on a dollar basis or unit volume basis.
Step 2 - Map out the business process. Ask yourself how does each part of your business contribute to the key performance indicators identified in step one?
Step 3 - Come up with business metrics that tie in the unit economics of the firm (Step 1) to the business process (Step 2).
Out of this process you will come up with several key performance metrics that will indicate how the business is doing. These metrics may not relate directly to dollars, but indirectly they will. Two great ways to approach this is to look at process bottlenecks and sales in terms of volume (i.e. # of feet, # of barrels, # of units).
Focus only on the most important metrics. Four to five will do. If you focus on too many, it will be hard to measure and difficult act upon. Here are some examples for various businesses:
Business - Metric Manufacturing - % Utilization of Machine (Bottleneck Machine) Consulting Firm - Average Bill Rate Jet Refueller - Gallons Per Aircraft Fueled
Step 4 - Also find some metrics that tie your business process down to the employee level. Relating this to the employee gives management a way to see how each employee contributes to business performance. Here are some examples for various businesses:
Business - Metric Construction Firm - # of Active Projects per Employee Construction Firm - Construction Cost per Employee Consulting Firm - Hours Billed per Employee
Step 5 - Review and monitor your results. Graphing the results may also be a very effective method to see what is going on in the business process. Flash reporting is an ongoing process until you have identified the key performance drivers for the business.
In the spirit of flexibility, the Flash Report can and ought to be customized to fit each company's needs. The basic format is just that….a basic platform to help get you started.
For the Productivity Section, some companies have also added the following items: Metrics for each Product Line or Business Unit, Separated out FTE employees versus Sales Employees (Example: Sales per Sales Person) and Sales per Full Time Employee.
Flash Reports:Profitability Section¶
This section gives you an estimate of how much money the company has made during the period. It is important to emphasize the word "estimate" for several reasons. First, the Flash Report itself was not meant for complete accuracy. This cannot be overstated. The Flash Report is used best when it is timely and mostly accurate- (80-90%) is good enough. Second, you will notice that profitability was derived from the estimate of the volume throughput for that period. This makes sense as sales and productivity are often a function of volume throughput (i.e. # of barrels, # of gallons, etc.). Another option is to obtain the values for Revenue, Cost of Goods Sold (COGS), Gross Profit, Overhead, and Net Income directly from your accounting system.
The second method is the simplest, but there is a hidden risk that you must account for. Not all the items associated with sales and cost/expenses may have been entered into your accounting system during that time period. Thus, there is a risk that the numbers you use may not even be "mostly accurate". It may or may not be. Thus, backing into your profitability estimate can help remove that risk. Now, you just need to make sure that you have a good grasp of how many units were sold as well as the associated costs.
Note, the metrics in the Productivity Section can be an excellent guide in helping you to start estimating the profitability of the firm.
The CFO/Controller sets it up. Then someone in the accounting department inputs the information into the template. Regular monitoring should be done by the Owner(s)/Management of the firm. Here are some ideas on how to get things started:
Option 1: Obtaining information directly from your accounting system. If you are obtaining revenue and cost information directly from your accounting system, then anyone with the proper authorization can obtain the numbers.
Option 2: Backing into the Profitability Numbers. The CFO/Controller, as well as, the key person(s) in charge of operations. Initially, it may be wise to have both parties involved. Operations will have the feel for units sold. Finance/Accounting may have a better grasp for costs.
Later on, you may decide to create a system where such numbers are automatically reported by someone as part of that person's responsibilities.
For those choosing to obtain numbers directly from the company's accounting system, it will be relatively simple to obtain. Just go to the Income Statement section to retrieve information regarding Revenue, Cost and Expense. However, please understand the risks as described above in the Goals section. You may be taking on some hidden risks by going directly to the Income Statement for the profitability information. Not all the information pertaining to sales and costs/expenses for that period may have been entered.
For those of you electing to indirectly arrive at profitability using sales volume and unit costs and unit price, please refer to the following steps:
Step 1 - Obtain data on the # of units sold, cost per unit, and estimate of monthly expenses. Having a good understanding of the unit economics of the firm will be key to making this step easier. Initially, this may be somewhat challenging to be able to collect. However, over time it will become easier. Here are some helpful tips:
Number of Units Sold: The operations department will need to keep records to in order to record how many units have been sold. There is no short cut here. However, if you can know 80-90% of the # of units sold, then that is enough.
Unit Sales Price: Sales and Accounting will need to keep good records on prices. Please note that sometimes, prices may have changed in the middle of the period.
Unit Sales Cost: Sometimes you can easily determine the cost using vendor invoices. If it becomes difficult, a helpful way is to look at historical P&L Statements. You can estimate the COGS amount for this period by seeing what historically they were as a percentage of revenue. For instance, if COGS was 60% of sales last year, then you can estimate COGS for this year as 60% of current revenue.
Step 2 - Plug in the data for Revenue, COGS, and Overhead Expense. Sum up as per the example in the Basic Format section.
Step 3 - Review and monitor your results. Graphing the results may also be a very effective method to see what is going on in the business process.
In the spirit of flexibility, the Flash Report can and ought to be customized to fit each company's needs. The basic format is just that….a basic platform to help get you started.
For the Profitability Section, some companies have also done the following: Report just the Gross Margin and/or Net Income. You can do this, but this does not excuse you from understanding the underlying unit economics. You still have to do your homework. Include profitability on a per employee basis.
Flash Reports:Monitor & Review
Now that you have assembled all the parts of the Flash Report, it is time to review your results. Again, it deserves mention that the purpose of the Flash Report is to provide management with a timely, "mostly accurate" tool to assess the current state of affairs. Thus, any changes that need to be made can be made quickly. Emergencies can be proactively addressed at the problem stage, rather than reactively in the crisis stage. If you want complete accuracy, wait until the financial statements for the period are complete 2-4 weeks after the month has ended. In the meanwhile, 80-90% accurate is fine for managing a business.
The Owner(s)/Management of the firm should review the results of the Flash Report after it has been completed. If possible, review on a weekly basis in order to expedite the decision making process. This way, the company can react to trends faster.
Any person or parties involved in the active management of the firm should certainly be included in the performance review of the firm. It is especially important that representatives from Operations, Finance, and Accounting be there as well.
In and of themselves, the numbers do not tell you a whole lot. They serve as a point of reference for discussion. It is recommended that you start off with the review of the firm's cash position. The cash position may provide questions as to why cash is short, which in turn will generate questions regarding A/R or sales.
Step 1 - Review the Liquidity Section This section will provide management an idea of whether or not they can pay the bills. Deficiencies will usually spring from a collections issue, sales issue or cost/expense issue. It will be up to management to explore each of these areas to see where potential problems lie.
Step 2 - Review the Productivity Metrics Section Ultimately, if done right, this section gets to the heart of the business process. It is important that the Finance/Accounting people are in accord with Operations people that these metrics are meaningful. If they are not, keep working at them until they are. This may be several iterations later.
Review of this area can tell management in a very simple way, how the business process is doing. These metrics should provide a simple read as to the how the heart of the business is beating. Should there be problems, these metrics should capture them in some way. In turn, revenue should be affected as well. For instance, revenue may be down, because a certain machine was down for repairs. Thus, % utilization could tell you indirectly why revenue was down for the period.
Step 3 - Review the Profitability Section Because the firm's productivity affects its profitability, so too will the results from the Productivity Section be seen in the Profitability Section. It is important for management to confirm this.
Continue to monitor results from period to period. If changes to Productivity Metrics need to be made, please feel free to do so. The key to successful implementation and use of the Flash Report is the commitment to its use and the commitment to communication and discussion.
Some companies may choose to graph the results in addition to having the flash report in a tabular format. A graph may at times be easier to understand than numbers, especially for analyzing trends.
For the purposes of the flash report, it may be useful to include 3 historical periods in addition to the current period. This will aid in the analysis of trends.
http://www.wikicfo.com/Wiki/Default.aspx?Page=How%20to%20Prepare%20a%20Flash%20Report&NS=&AspxAutoDetectCookieSupport=1
Showing posts with label Dashboard. Show all posts
Showing posts with label Dashboard. Show all posts
3/25/11
10 efficient ways to produce useful metrics
Takeaway: Accurate metrics are essential for assessing performance and making informed decisions, but companies often rely on flawed information that paints a misleading picture. Alan Norton explains the most efficient strategies for obtaining valid, useful metrics.
The one constant in my career has been the collection and distribution of company information. I didn’t know the cost of the metrics I was producing. Those costs were never measured. But I did know my labor costs and the costs of the supplies I was purchasing. Multiply that by each department in the company where I worked and I knew that the numbers had to be getting real big, real fast. I also knew that there were opportunities there for big cost savings.
It is not difficult to make a case for more efficient metrics. Significant cost savings can be realized by reviewing and improving how and what metrics your company produces. Metrics are expensive. Add up the true total costs and they can be quite considerable:
•Printers
•Paper
•Printing supplies
•Labor
•Development
•Production
•Distribution
•Maintenance
And the costs don’t end at document creation. Metrics are shared multiple times, either electronically or physically. The security of company sensitive metrics is an additional responsibility and cost. The metrics must be managed, stored, and retrieved –all activities more costly than you might guess.
I won’t try to argue that metrics are in any way fun to discuss. However, their importance to the health of a company is undeniable. Get the metrics wrong and a company’s full potential will not be realized. I have seen enough to know that the metrics used by companies both large and small can be improved. Here are 10 ways to do just that.
Note: This article is also available as a PDF download.
1: Measure performance at aggregate levels and exceptions at lower levels
I have produced a lot of charts in my time. In retrospect, I realize that I produced too many charts. Many of those charts provided no value at all — they showed performance on schedule or close to on schedule for a number of subassemblies. Printing these charts might have given managers a reassuring sign that all was well, but little else. The better approach is to use exception reporting and set upper and lower limits. Sure, go ahead and measure performance at higher levels. But report only exceptional performance, good or bad, at the more granular levels.
2: Eliminate metrics with little or no value
Know the cost of each metric. Are all your metrics worth reporting? A cost benefit analysis can help identify reports that are costing more than they are worth. A best guess estimate of potential savings must be included in the analysis, so it is not as simple a process as it might first appear.
It can be difficult to discard those old, comfortable shoes when you’re rummaging through your closet. But if they’re no longer useful, they should go. The same applies to those charts and reports that managers have become comfortable seeing. Nevertheless, if they are of little or no value, they should go.
3: Avoid tying incentives to lower level metrics
Meeting goals at the department level can be detrimental to the company’s overall performance. For example, a help desk manager might be paid a bonus for increasing completed tickets at tier one. But this is counterproductive if the overall costs rise due to the increased workload at tier two and lower. Bonuses and other incentives should be tied to the corporate bottom line and not departmental performance.
4: Avoid metrics that are inaccurate, misleading, or ambiguous
Producing metrics that are inaccurate or ambiguous can be costly to correct if they lead to bad decision making. There are a number of reasons why metrics can be inaccurate, misleading, or ambiguous:
•Invalid assumptions
•Errors in data collection
•Incomplete data
•Outdated data
•Questionable/unverified data
•Difficult to measure data
•Subjective (not objective) data
•Complex and multifaceted data
Some metrics are difficult if not impossible to measure. Managers are nevertheless tasked with boiling down metrics like software development into one or two charts. Similarly, other metrics, like employee happiness, just don’t translate well into numbers and should be avoided. I’m not suggesting that measuring this type of information should be avoided altogether, just not presented as numbers in chart format.
5: Avoid skewing the data
One simple example of data skewing is reporting costs over a long period of time. 2010 dollars are not the same as 2005 dollars. If you are not compensating for inflation, you are delivering misleading information. Obtaining too small a sample or a non-random sample are other common ways that data can be skewed.
6: Standardize and consolidate
Reduce the amount of information generated by eliminating redundancies and standardizing where possible. Financial reports, like manpower metrics, can usually be centralized and standardized for all departments. There are those unique metrics that can’t be standardized for all departments, but many of these can be standardized across divisions.
7: Use unbiased personnel or outsource connect
Being a reporting guy my entire career, it isn’t surprising that I ran across a manager or two who wanted to game the system. There are countless ways to lie with numbers or, at a minimum, hide poor performance by the appropriate (or should I say inappropriate) manipulation of the data. One example I saw was to use fiscal YTD values instead of a 12-month moving window. The obvious problem with this is that when a new fiscal YTD starts you have no previous data points to show a trend. And that is exactly the goal. It’s a great way to hide bad numbers. I reported directly to the manager asking for the fiscal YTD format, so I was in no position to question his motives. The inherent problem created with this type of working relationship is another reason why metrics production should be centralized and reported directly to upper management or outsourced.
8: Automate whenever possible
Gathering data by hand and entering numbers into a charting program is a labor intensive and costly endeavor. Since charts are often generated weekly or even daily, one or more people can spend most of their time preparing the charts. If the data is available online, the charts should be automated. If the data is not available online and must be collected by hand, consider developing systems that can collect the data at a reasonable cost.
9: Consider going paperless
If your company hasn’t already done so, going paperless can save a lot of money. However, paper should still be an option and care should be taken before converting a report to online only. If it takes more time to look up a metric online, the additional labor costs can far outweigh the savings.
10: Be careful what you measure
All too often, overly simplistic metrics focus on only part of the whole picture. A metric like “IT spending as a percentage of revenue” treats IT services as a cost. But such incomplete information can lead to poor decision making. The challenge for IT managers is to develop metrics that show the value added by IT and get them under the CEO’s nose.
The very act of measurement determines where managers will place time and resources — often at the expense of other unmeasured metrics or other departments’ metrics. Measure too little and important performance metrics can be missed. Measure too much and the focus can be lost from the mission-critical metrics. The costs of measuring the metrics can then quickly exceed the benefits. The metrics package should be carefully selected to balance these tradeoffs.
The bottom line
Metrics are like laws. They are born but never seem to die. An annual review of the company’s metrics package provides a good opportunity to add new metrics, update out-of-date metrics, and discontinue those metrics that are no longer needed. Select your metrics package carefully. What you measure is what you get.
For further information, check out the whitepaper Efficient Metrics: Be Careful What You Measure.
http://www.techrepublic.com/blog/10things/10-efficient-ways-to-produce-useful-metrics
The one constant in my career has been the collection and distribution of company information. I didn’t know the cost of the metrics I was producing. Those costs were never measured. But I did know my labor costs and the costs of the supplies I was purchasing. Multiply that by each department in the company where I worked and I knew that the numbers had to be getting real big, real fast. I also knew that there were opportunities there for big cost savings.
It is not difficult to make a case for more efficient metrics. Significant cost savings can be realized by reviewing and improving how and what metrics your company produces. Metrics are expensive. Add up the true total costs and they can be quite considerable:
•Printers
•Paper
•Printing supplies
•Labor
•Development
•Production
•Distribution
•Maintenance
And the costs don’t end at document creation. Metrics are shared multiple times, either electronically or physically. The security of company sensitive metrics is an additional responsibility and cost. The metrics must be managed, stored, and retrieved –all activities more costly than you might guess.
I won’t try to argue that metrics are in any way fun to discuss. However, their importance to the health of a company is undeniable. Get the metrics wrong and a company’s full potential will not be realized. I have seen enough to know that the metrics used by companies both large and small can be improved. Here are 10 ways to do just that.
Note: This article is also available as a PDF download.
1: Measure performance at aggregate levels and exceptions at lower levels
I have produced a lot of charts in my time. In retrospect, I realize that I produced too many charts. Many of those charts provided no value at all — they showed performance on schedule or close to on schedule for a number of subassemblies. Printing these charts might have given managers a reassuring sign that all was well, but little else. The better approach is to use exception reporting and set upper and lower limits. Sure, go ahead and measure performance at higher levels. But report only exceptional performance, good or bad, at the more granular levels.
2: Eliminate metrics with little or no value
Know the cost of each metric. Are all your metrics worth reporting? A cost benefit analysis can help identify reports that are costing more than they are worth. A best guess estimate of potential savings must be included in the analysis, so it is not as simple a process as it might first appear.
It can be difficult to discard those old, comfortable shoes when you’re rummaging through your closet. But if they’re no longer useful, they should go. The same applies to those charts and reports that managers have become comfortable seeing. Nevertheless, if they are of little or no value, they should go.
3: Avoid tying incentives to lower level metrics
Meeting goals at the department level can be detrimental to the company’s overall performance. For example, a help desk manager might be paid a bonus for increasing completed tickets at tier one. But this is counterproductive if the overall costs rise due to the increased workload at tier two and lower. Bonuses and other incentives should be tied to the corporate bottom line and not departmental performance.
4: Avoid metrics that are inaccurate, misleading, or ambiguous
Producing metrics that are inaccurate or ambiguous can be costly to correct if they lead to bad decision making. There are a number of reasons why metrics can be inaccurate, misleading, or ambiguous:
•Invalid assumptions
•Errors in data collection
•Incomplete data
•Outdated data
•Questionable/unverified data
•Difficult to measure data
•Subjective (not objective) data
•Complex and multifaceted data
Some metrics are difficult if not impossible to measure. Managers are nevertheless tasked with boiling down metrics like software development into one or two charts. Similarly, other metrics, like employee happiness, just don’t translate well into numbers and should be avoided. I’m not suggesting that measuring this type of information should be avoided altogether, just not presented as numbers in chart format.
5: Avoid skewing the data
One simple example of data skewing is reporting costs over a long period of time. 2010 dollars are not the same as 2005 dollars. If you are not compensating for inflation, you are delivering misleading information. Obtaining too small a sample or a non-random sample are other common ways that data can be skewed.
6: Standardize and consolidate
Reduce the amount of information generated by eliminating redundancies and standardizing where possible. Financial reports, like manpower metrics, can usually be centralized and standardized for all departments. There are those unique metrics that can’t be standardized for all departments, but many of these can be standardized across divisions.
7: Use unbiased personnel or outsource connect
Being a reporting guy my entire career, it isn’t surprising that I ran across a manager or two who wanted to game the system. There are countless ways to lie with numbers or, at a minimum, hide poor performance by the appropriate (or should I say inappropriate) manipulation of the data. One example I saw was to use fiscal YTD values instead of a 12-month moving window. The obvious problem with this is that when a new fiscal YTD starts you have no previous data points to show a trend. And that is exactly the goal. It’s a great way to hide bad numbers. I reported directly to the manager asking for the fiscal YTD format, so I was in no position to question his motives. The inherent problem created with this type of working relationship is another reason why metrics production should be centralized and reported directly to upper management or outsourced.
8: Automate whenever possible
Gathering data by hand and entering numbers into a charting program is a labor intensive and costly endeavor. Since charts are often generated weekly or even daily, one or more people can spend most of their time preparing the charts. If the data is available online, the charts should be automated. If the data is not available online and must be collected by hand, consider developing systems that can collect the data at a reasonable cost.
9: Consider going paperless
If your company hasn’t already done so, going paperless can save a lot of money. However, paper should still be an option and care should be taken before converting a report to online only. If it takes more time to look up a metric online, the additional labor costs can far outweigh the savings.
10: Be careful what you measure
All too often, overly simplistic metrics focus on only part of the whole picture. A metric like “IT spending as a percentage of revenue” treats IT services as a cost. But such incomplete information can lead to poor decision making. The challenge for IT managers is to develop metrics that show the value added by IT and get them under the CEO’s nose.
The very act of measurement determines where managers will place time and resources — often at the expense of other unmeasured metrics or other departments’ metrics. Measure too little and important performance metrics can be missed. Measure too much and the focus can be lost from the mission-critical metrics. The costs of measuring the metrics can then quickly exceed the benefits. The metrics package should be carefully selected to balance these tradeoffs.
The bottom line
Metrics are like laws. They are born but never seem to die. An annual review of the company’s metrics package provides a good opportunity to add new metrics, update out-of-date metrics, and discontinue those metrics that are no longer needed. Select your metrics package carefully. What you measure is what you get.
For further information, check out the whitepaper Efficient Metrics: Be Careful What You Measure.
http://www.techrepublic.com/blog/10things/10-efficient-ways-to-produce-useful-metrics
5/6/10
What financial data business owners neeed to know everyday
Yesterday Sales
Yesterday Cashflow
Last 30 Day Sales
Last 30 Day Cash Flow
Last 30 Day Top Selling Items
Last 365 Day Sales
Last 365 Day Cash Flow
Low Inventory Items
Yesterday Cashflow
Last 30 Day Sales
Last 30 Day Cash Flow
Last 30 Day Top Selling Items
Last 365 Day Sales
Last 365 Day Cash Flow
Low Inventory Items
4/14/10
The Dashboard Demystified
by Victoria Hetherington, Dundas Data Visualization
Wednesday, September 23, 2009
This article aims to provide a fundamental understanding of what a dashboard is and provide a brief look at what dashboards can do for an organization. There is an abundance of dashboard literature out there and this article is a good starting point for those interested in a high level understanding of dashboards.
A dashboard is a business tool that displays a set of PIs (performance indicators), KPIs (key performance indicators), and any other relevant information to a business user. Dashboard data is often displayed in real-time after retrieval from one or more data sources in a business. Dashboards are interactive, allowing an executive to drill into particular aspects of the display or switch between facets or views of the data. Key performance indicators need special consideration because they are high-level measurements of how well an organization is doing in achieving critical success factors – in other words, the goals or targets set by an organization in their strategic plani. Dashboards are composed of data visualization tools like charts, grids, gauges and maps. Many different sectors of many different businesses benefit from dashboards: both a miner determining where to drill from a map of a geographical area and a CEO deciding where to channel funds would benefit from dashboard use.
Dashboards can provide an effective solution to the overwhelming amount of data that business users experience every dayii. A dashboard can save employees time - and companies money - by making everything more intuitive, easier to observe, and allowing for extensive, real-time access instead of going through papers and emails to compile information. In order to have a significant return on the investment of a dashboard, it is important that the dashboard be exactly tailored to suit the needs of a company or a particular role within a company. In addition, it is important that a dashboard have metrics that are meaningful and useful to its target audience. Dashboard vendors, and those looking to invest in dashboards, must consider dashboard options such as interface – i.e., would a primarily graphical interface or an integration of graphics and text suit best? How about a static display or an interactive displayiii? Would it be necessary to invest in an ODS (operational data store) to store and support access to data and metadataiv?
Before deciding on a dashboard and becoming familiar with dashboard categorization and the countless types of data visualization tools available, it is important to be aware of several traits all good dashboards have in common. All dashboards should display a quantitative analysis of what is going on with immediacy and intuitiveness. They should offer creative visual insight, such as an anatomy chart or heat map would offer a hospital – but the interface must not be overly complex: distractions, clichés, and unnecessary embellishments can create confusionv. Good dashboards offer appropriate context for data: for example, a gauge may show that Company X sold 1000 units this year, but compared to what? Highlighting relevant data, effective color use, and a visually appealing interface all help too. A good business dashboard, in other words, pairs dashboard technology with visual effectiveness. In more explicit terms, here are some key elements of a good dashboard:
- It communicates with clarity; quickly, and compellingly. Simplicity is key.
- It has minimal unnecessary distractions, no matter how interesting, which could cause confusion.
- It organizes business information to support meaning and usability
- It applies the latest understanding of human visual perception to the visual presentation of information
- It is pleasant to look at
Due to the incredible array of available dashboard technologies, definitive categorization of dashboards is a difficult task. One can categorize dashboards in terms of role, or strategic, analytic, and operational dashboards. Vendors are probably most used to referring to dashboards in these termsvi; though there are several other categorizations that are very common as well.
Most often, dashboards are used for strategic purposesvii. The common executive dashboard, designed for a strategic manager of a medium-sized business, for example, is a strategic dashboard. The strategic dashboard allows for a quick overview of an organization’s ‘health,’ so to speak; assisting with executive decisions such as the formation of long-term goals. The strategic dashboard, therefore, doesn’t require real-time data: what is going on right now is not important, what is pressing is what has been going on. When designing a strategic dashboard, visual communications experts recommend keeping the interface simple – showing just what has been going. It should be noted that not only higher-up corporate people use strategic dashboards to monitor an organization. For example, a middle manager can monitor data on a dashboard, and then create a presentation to pitch to his CEO about the data he has observed.
The analytic dashboard, as the name suggests, assists with data analysis. This can include making comparisons, reviewing extensive histories, and evaluating performance. When using an analytic dashboard, a tactical manager can go beyond what is going on – as with the strategic dashboard – and drill into the causes. They can determine why sales targets were not met; why problems keep occurringviii. Through exploring these patterns, goals can be set to correct these issues over time.
The operational dashboard monitors functions which need constant, real-time, minute-by-minute attention, from a blood pressure monitor in an operating room to an assembly line in a refrigerator factory. As with the strategic dashboard, it is recommended that an operational dashboard have a simple interface: no statistics or analyzing. All that is required of a good operational dashboard is immediacy and practicality, like names of workers and sections of the workplace. They are generally used by those on a departmental, rather than executive levelix.
Categorization of dashboards can go another, equally common route: a vendor could categorize dashboards by the type of data they handle: either quantitative; or pertaining to data based on quantity or number – which is overwhelmingly more common – or qualitative; which could include scheduling and simple, pertinent lists. A vendor could also think of dashboards in terms of domains, both vertical and lateral. A vertical dashboard is specialized for a specific industry, such as mining, manufacturing, banking, or healthcare. Dashboards in lateral domains are designed for the internal departments that most organizations have: the financial, marketing, manufacturing, and human resources departments of a bank, a mining company, and a hospital could all use a similar dashboard to create goals and determine solutions for financial problems; likely from strategic and analytic dashboards for example. It is hard to have an understanding of one mode of categorization without the other.
There are many, many different kinds of dashboards, all tailored to fit specific roles and almost every lateral and vertical cross-section of the world’s industries. This article described three fundamental types of dashboards, but a dashboard does not need to fit one of the categories in order to be successful. Successful dashboards convey a great deal of dense necessary information with clarity and immediacy. Over time, a successful dashboard will improve an organization’s decision-making based on aggregated BI, assist in goal-setting, help monitor negative trends, and improve workplace productivity.
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