Ready to invest in AI?
Schedule time with Zeni's finance pros to learn more.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
The business metrics included in financial dashboards vary. The best financial dashboards condense complex data and information gathered during the bookkeeping and accounting process into a smaller key performance indicator (KPI) set that gives you at-a-glance insight into how well your business is performing financially.
For the sake of clarity, let’s take a moment to make the distinction between a metric and a KPI. A metric is any of the vast arrays of numbers that quantitatively express the performance of a business.
Put even more simply: If there’s an aspect of your business that you can measure with a number, that number is a metric.
Most of those metrics, on their own, won’t be particularly useful when you or your finance manager are making decisions for your startup.
That’s where KPIs come in.
Financial KPIs are specific measurables that give you actionable insights into the financial performance of your company. There are other types of KPI, like marketing KPIs and project management KPI measures.
All KPIs are metrics, but not all metrics are KPIs. What sets KPIs apart is their value in understanding and making decisions about your company’s financial health.
3 Top financial KPIs to look for in a dashboard
Because every startup is different, which specific KPIs (and how many) that will benefit you depend on various factors, including your industry, level of funding, and company culture and values.
Only you (with the help of experienced financial professionals) can determine those KPIs.
Because most startups don’t generate a net income at first, some metrics tend to be less relevant—like net profit margin—but others are always essential.
There are three top financial KPIs that every startup owner should know: net burn, cash runway, and cash zero date.
Your net burn is the total amount your company loses each month. For instance, if a SaaS startup spends $7,000 per month on office rent, $20,000 per month on employee compensation, and $8,000 per month on server costs but brings in $10,000 per month in total revenue, its net operating burn would be $25,000.
Your runway is the amount of time—provided your net burn remains the same and you don’t raise any additional funds—your business has before it runs out of cash. If the example company above has $150,000 in the bank, it would have a runway of six months.
Your cash zero date is, simply, when your business will run out of money at its current spending rate (in other words, the end of your runway).
If the above scenario describes the circumstances of our example company in February, its cash zero date would be August of the same year.
For obvious reasons, having accurate and up-to-date access to these finance KPIs is crucial for any startup founder and can mean the difference between the success and failure of the business.
What reports does it need?
Of course, every business is different, meaning each business will have its own reporting needs and financial goals.
For example, a SaaS company should focus more on churn reports; a startup with inventory might need to focus more on COGS.
You'll also need to consider finance metrics versus KPIs and decide which is more important for your company.
However, every finance KPI dashboard should also include broader financial metric trackers to yield actionable insights for you and your teams.
Here are the most valuable reports your finance team shouldn’t ignore.
1. OpEx
.png)
Operating expenses, or OpEx, are your business's total costs during normal operations. They’re subtracted from gross income to arrive at operating income.
Operating expenses include inventory, labor compensation, rent, materials, and other basic expenses. Every expenditure necessary to keep your company running and productive counts as an operating expense.
Tracking operating expenses and seeing how they fluctuate can help you build invaluable insights into your business’s profitability. This, in turn, can fuel decision-making about the materials, labor force, and worksites you choose to use.
2. Cash flow insights
.png)
Business leaders need to know how much of the company's funds are available at any moment. They also need a grasp of how much cash the company has on hand to make purchases.
Many businesses have trouble answering these questions, simple though they may seem. But when you don’t have a solid understanding of operating cash flow, it’s hard to decide about buying new inventory or equipment.
It’s also difficult to be certain about timing when scaling your company.
That’s why having a cash flow dashboard that can crunch your numbers constantly is important.
3. Revenue insights
Revenue insights are metrics that look at your products or services and help you decide on pricing and cost.
Cost of sales (COS), cost of goods sold (COGS), and gross margins are all great examples of revenue insights. These metrics determine how much you’re paying to manufacture products or create services.
Once you know those figures, you can compare them to your company's price for goods or services.
For example, you may discover you’ve been spending $20 to produce a pair of gloves, but you’re only selling the gloves for $21. It's difficult to grow a business with a small net profit margin.
You’ll need to raise the price of your gloves, or else you’ll need to source lower-cost materials and labor to lower the COGS.
Similarly, managing OpEx allows business leaders to see whether they are overspending on production.
This allows founders to know whether they are receiving adequate revenue from sales to compensate for those costs.
Required finance dashboard capabilities
Now, it’s time to think about what capabilities your financial reporting dashboard should have.
Again, this will vary a bit from company to company. But broadly speaking, there are some capabilities that every dashboard should include.
1. All data unified in one place
Many businesses suffer from having their data in silos, so only one department can access it. Or your data is spread across too many platforms, causing discrepancies in reporting and making it difficult to analyze performance.
Your financial dashboard should unify all your finance data, like your cash flow statement and balance sheet, across multiple sources, like payroll providers, bank accounts, credit cards, revenue sources, bill pay providers, and accounting software.
This makes financial information easy to access and increases the likelihood that your teams will check in regularly and use data to make decisions. It also ensures teams can compare and contrast data from different sources to generate richer insights.
2. Updates books daily
An effective financial dashboard example will update your books and every financial report at least once every day, so you can always access the latest information and insights.
For example, you’d want your operating expenses report updated daily so that you can have instant insight into your cash burn and expenses. When you know this information, you can quickly pivot on a dime and make more timely, educated business decisions.
3. Real-time insights and analysis
All the data in the world isn’t valuable unless you can draw insights from it.
Your revenue dashboard should be capable of organizing and using your data to create insights and analysis. The best dashboards can apply AI and machine learning tools to deliver those insights in real-time.
Real-time insights allow founders and Chief Financial Officers (CFOs) to make smart, data-driven decisions whenever needed. As mentioned above, these insights are important for teams to act on as soon as they realize, for example, a project has exceeded the budget instead of waiting until the issue becomes more severe.
4. Ability to switch between accounting methods—Cash basis vs. accrual basis
The cash-based accounting method records financial activities only when you make or receive an actual payment. The accrual method records activities based on invoicing structure.
Most businesses today use a mixture of the two approaches. Using the traditional accrual accounting approach may give your business a more long-term financial overview.
But using the cash-based accounting approach gives you greater flexibility and the ability to correct overspending quickly.
Look for an interactive dashboard that can accommodate both instead of only one.
4. GAAP compliant
Every publicly traded company in the U.S. must comply with the Generally Accepted Accounting Principles, or GAAP. But even at the startup phase, we recommend following GAAP from day one rather than backtracking and reorganizing your finances when the time comes.
Look for a KPI dashboard template that makes compliance easy. GAAP-compliant software guides your teams to enter information from each data source correctly. It also automatically saves, so you have records of all your transactions in case of an audit.
Some key financial metric dashboards also have an error net, so you’ll be notified of any errors. Proactive dashboards fix the errors automatically and send updates.
Can basic bookkeeping and accounting software provide the same support?
Some people may be reluctant to invest in AI-powered data analytics when plenty of bookkeeping software is already on the market.
The truth is bookkeeping software does not fill the same function as an AI-driven dashboard. Bookkeeping software can be a convenient way to store information—it can even be a useful tool for creating spreadsheets.
But that software can’t analyze your sales figures and find patterns. Bookkeeping software also can’t spot wasteful spending, help with financial forecasting, or help you plan a new budgetary strategy.
A smart sales dashboard with the right AI key features can do all these things. AI excels at finding patterns and identifying unusual behavior.
The more financial data you feed it, the more it will build up an accurate picture of your financial situation. This enables it to recommend what actions you should take.
Are you a business owner seeking a financial dashboard with the KPIs your startup needs to succeed?
Now that you know more about how financial dashboards work, assessing what you need is a good idea. You may already have an Excel dashboard, but it doesn't meet your company's needs.
Or you're still in the first stages of building a new dashboard with the KPIs that can put you on the path to a breakthrough.
Creating an effective CFO dashboard can yield actionable, data-driven insights about your business. These insights can reduce your operating expenses and help you toward greater growth and increased productivity.
Learn more about finance KPI dashboards here and how to find one that fits your growing startup’s needs.
.avif)
