Financial Dashboards: A Comprehensive Guide for Better Financial Management

According to projections, the world will generate a staggering 463 exabytes of data daily by 2025.

The finance industry is no exception. But the real problem is making sense of such massive amounts of data. Manually, searching through this data to find specific information is impossible.

One way to use data for decision-making is to build a dashboard to see the important stuff in real time. In this article, we will discuss how a dashboard is essential for financial management.

Understanding financial dashboards

A financial dashboard tells you how well your company is doing financially.

It turns sales data or expenses into colorful, interactive charts and graphs   

in a way that enables relevant, clear, and actionable decisions.

For example, a line chart shows your expenses increased over the last quarter. This means you need to find out what made the costs grow in the last three months. It might be because you are overspending on marketing and ads.

You can use this information to really understand why the marketing costs are high and take cost-cutting measures to bring them down.

See it in action
Financial Dashboard

Why do you need dashboards in finance management?

Real-time updates:

A financial dashboard can show you cash flow, live market data, etc.

It is essential to have real-time updates to identify patterns and potential opportunities quickly. You can use this information to make the right decisions at the right time.

Risk management:

You can track risk-related metrics to identify potential losses in the future.

For example, it can track customer credit scores, cashflows, and debt-equity ratios. Customer credit scores help you to decide whether to provide credit to them again. Closely monitoring cashflows can prevent liquidity issues. The debt-equity ratio lets you figure out whether you are taking risks by borrowing too much money.

Fraud detection:

The dashboard can highlight any suspicious activity. You can set up alerts based on previous activity to scan for potential scams.

For example, you can set an alert to notify you if any transaction is over a certain threshold amount. Then, you can investigate the transaction and verify its authenticity.

Transparency in communication

Dashboards help stakeholders see how the company is doing financially by showing crucial numbers and financial signs.

This makes it easier for everyone to communicate, collaborate, and take responsibility in the company.

Improved financial performance

Dashboards are great for making smart decisions based on data.

They show financial information in a simple way, helping finance teams analyze performance, spot areas for improvement, and make better decisions to boost financial results.

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Types of financial management dashboards

Financial management dashboards offer a visual snapshot of critical financial metrics. Let's explore three key types:

Risk management dashboard

This dashboard offers a live overview of possible risks to a company's financial well-being. It includes essential metrics such as:

• Value at risk
• Risk-adjusted return on capital

Asset management dashboard

This dashboard focuses on the performance and efficiency of an organization's assets. Key metrics include:

• Return on assets
• Net income

Loan portfolio management dashboard

This dashboard provides insights into the performance of a loan portfolio. Key metrics include:

• Average loan yield
• Interest income

These are just an overview of different types of financial dashboards. We will explore some of these KPIs further in later sections.

See it in action
Financial Dashboard

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Three best practices for designing a dashboard

Dashboard design is a skill, and it takes time to master it. But you can implement the following tips to make your dashboard look good from the beginning.

Design principles:

Simplicity:

The design should be simple enough to highlight the important stuff. Keep what is necessary and remove anything else.

Clarity:

The users must be able to navigate the dashboard to find the information they need quickly. The text should be clear and specific about what it is conveying.

Consistency:

Use consistent color schemes and typography for headings, buttons, and calls to action. Stick to a few colors. Ensure the tone of your content is consistent.

Hierarchy:

Keep the most important KPIs, such as return on assets, net income, and interest earned, at the top of the dashboard. It grabs the user's attention and keeps them updated.

Use colors to highlight important stuff:

Here are a few ways to use color to highlight important stuff:

1. Use a specific color or underline links in the dashboard.
2. Use red for negative or error messages and green for positive or success indications. Examples:

• Red for sales targets not met
• Green for sales targets exceeded
• Blue for neutral performance
• Orange for potential opportunities

Make sure you have enough contrast between text and background for readability.

Layout and Structure:

Use white space:

Use white space to give room between elements and KPIs to make them look clean and aesthetically pleasing.

You might think keeping most of the KPIs together will provide as much as possible to the user, but it will only clutter the dashboard. So, use white space to your advantage.

Prioritize content:

The crucial information for your financial dashboard keeps changing based on the situation and requirements. So, keep refreshing the most essential KPIs at the top and keep the less relevant ones at the bottom of the dashboard.

Use the grid layout:

A popular grid layout is a 12-column grid. It offers flexibility for various dashboard designs.

Start with a basic grid layout and experiment with different grids to see what works for you. Whatever grid you choose, make sure it adds to the user experience.

Data visualization:

Choose the right chart type:

Each type of data makes the most sense with specific visualizations.

For example, the income growth rate in a line chart shows you a clear pattern of growth. The same growth rate in a pie chart doesn't bring out the essence of it.

Remove unnecessary elements:

Reduce the data points.

For example, instead of daily operational costs, show weekly average costs to simplify the chart.

Additional tips:

Mobile optimization:

Make sure the dashboard design is responsive. It should adjust to different screen sizes and orientations for the best viewing experience on smartphones and tablets.

Test and improve:

Try running some user tests to see how well the dashboard works. You can ask users to complete specific tasks and watch how they interact with it.

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Financial dashboard templates with samples and examples

Performing vs. non-performing loan value:

This chart shows a comparison between performing and non-performing loans. The comparison is among short-, long-, and medium-term loans.

Performing loan: The borrower is paying back the loan; the full amount is expected.  

Non-performing loan: Borrower has stopped paying; the lender might not get all the money back.

This chart helps you identify the non-performing loan value for each term so that you can take proper action to reduce the default payers.

Net income:

Net income is the amount left after paying all your expenses.

Why is it important?

• It shows the overall health of your business.
• It helps you make decisions about spending and investing.
• It's used to calculate other important financial metrics.

Department: Allocation vs. earnings

Allocation is the budget a department can spend.

For example, the finance department might get $100,000 to use for stuff like advertising and investment. 

Earnings are the revenue a department brings in.

For example, the sales department might earn $500,000 from selling financial services.

If a department makes more than it's supposed to, it's doing great. If it makes less, there might be a problem. This comparison helps a company figure out where to put money in the future.

These metrics are taken from the DataBrain finance dashboard. You can check the complete dashboard and explore its functionalities here.

Conclusion:

A financial dashboard takes your decision-making one step further by helping you get information in real time, prevent fraud, and improve your financial performance.

If you want to make financial decisions based on data, not just intuition, you will need a dashboard that is easy to create and maintain and adds a layer of security to your data.

So, start building a financial dashboard easily by signing up to DataBrain.