In this article, we’ll look at a case study about a fictional company that wants to improve its cashflow management, and in particular, determine whether or not its financial objectives have been met.
Better company cashflow management with a cost monitoring dashboard
Budget monitoring is a priority for any company that wants to ensure smooth operations. For ongoing tracking, or even periodic check-ins, financial managers need to have the company’s complete financial information in hand to do in-depth analysis and make decisions accordingly. But in reality, do these managers actually have access to this kind of data?
The truth is, sometimes these people only have an approximate idea of the company’s costs and revenue, which leads to approximate decision-making based on unreliable information.
So how can you avoid this? By using a cost monitoring dashboard.
Measuring performance against objectives and gaining factual information using the cost monitoring dashboard
The cost monitoring dashboard is a strategic tool that helps define and evaluate a company’s financial success.
With this type of dashboard, the company’s management team has all the information they need to put strategies in place: using factual information—both quantifiable and justifiable—to make smarter strategic decisions.
To more effectively track financial health and achievement of objectives, the company has a tool for easily comparing budget forecasts and objectives in real time. This information can help identify variances and what is causing them, so the company can adapt its strategy to match reality.
Developing the dashboard
The company followed the steps below to develop the dashboard.
The primary purpose of a cost monitoring dashboard is to effectively manage cashflow.
- Evaluating a company’s financial status in one glance;
- Quickly identifying potential anomalies by highlighting significant variances from the planned budget and estimated revenue,
- Identifying trends in a preventive rather than reactive way;
The cost monitoring dashboard should enable the company to answer the following questions:
- Do the budgetary trends match expectations with regard to the schedule?
- Which departments are spending more than planned?
- Should we adjust our estimates up or down?
- What is the forecasted return on investment?
The dashboard serves to help the company meet and exceed its financial objectives by optimizing costs and expenses.
- Gross profit margin percentage;
- Operating margin percentage;
- Operating expenses ratio;
- Net profit margin percentage;
- Cost variances;
- Revenue variances.
Data aggregation and processing
All useful data for the project is stored in a database, which was created previously by the team using data modelling from the different data warehouses.
Which information will be presented
The dashboard has two main sections:
The first sums up the company’s profits and losses
- KPIs: the quantitative results related to the company’s finances;
- Changes to and details of operating costs over the last 12 months;
- Changes to profits over the last 12 months;
- A table summarizing the income statement.
The second covers the variances between costs and the company’s objectives
- Some graphs show the variance between estimates and reality;
- Others provide a summary of the estimated costs and revenue compared to reality.
Formatting and viewing
For easier reading and navigation, the cost dashboard is separated into two sections over two pages. The important KPIs appear in a prominent location at the top of the page, and then tables and graphs are presented, pictured below.
Choosing the tool
The company chose to invest in a custom program to make sure the software really fit their needs. They also chose to hire an external team to manage their IT infrastructure, which allows them to focus 100% on their primary concerns.
The final dashboard
Presenting the results
Page 1: Profits and losses
This section identifies different optimization methods for increasing earnings: whether by increasing revenue, lowering costs, or both.
Page 2: Revenue and cost variance
This part of the dashboard makes it easy to see variances and their causes, so that the various levels of management can evaluate them and directly discuss what needs to be done to address the issues.
Get on the right track with the cost monitoring dashboard
The leadership quickly found the important information in the dashboard to get them talking about the company’s strategic future:
- Should the budget be adapted based on the season?
- Should we adjust how the budget is distributed?
- Should we invest in better machinery, considering the maintenance required for the current machinery?
In the end, all of these questions came from data in the cost monitoring dashboard, and clearly gave the company a good overall picture so they can make decisions that will boost the company’s growth.
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