How to develop Financial Planning & Analysis dashboards

Dashboards are essential business tools that managers use to review different functions and act quickly. However, creating dashboards has been almost an art form, not accessible to all. That’s changing though―with better tools and data availability, it is now easy for anyone to build their dashboards.

Stephen Few, a thought leader in information design, included a few criteria for a dashboard in his book "Information dashboard design: the effective visual communication of data," namely:

• It should be a visual display of information
• It should consolidate one or more objectives on a single screen
• It should be easily monitored at a glance.

What are FP&A dashboards?

FP&A dashboards have evolved from simple Excel tables and graphs to dedicated visualization software. They are no longer limited to financial numbers but include key performance indicators (KPIs) for different activities, such as pipelines, marketing campaigns, supply chain performances, and more. This change from purely financial numbers to encompassing KPIs highlights the expansion of dashboards, particularly for the FP&A function.

With this objective in mind, how can FP&A professionals create helpful and informative dashboards to support their business partners? Let’s learn more

Theoretical framework for developing FP&A dashboards

1. Define the audience of the dashboard

To create a meaningful and impactful dashboard, it is crucial to begin by clearly identifying your audience and your purpose. Consider what you aim to accomplish with your dashboard, who will be viewing it, the specific information they require, and how they will utilize it. By answering these questions, you can refine the scope and content of your dashboard, ensuring that it provides relevant and valuable insights without unnecessary data.

Let’s say that you aim to improve sales efficiency by creating a sales performance dashboard. The audience includes sales representatives, regional managers, and the sales director. Sales representatives need individual performance metrics and pipeline analysis, regional managers require insights into regional performance and revenue, and the sales director needs a high-level overview of overall sales performance.

By refining the dashboard's scope and content to meet each audience's specific needs, the company can provide relevant insights and support data-driven decisions to boost sales performance. However, this is only achievable if you plan for this outcome right from the planning stage. So, yes, if you start well, then the results will be better.

2. Define the objectives of the dashboard

The next crucial step is selecting the appropriate key performance indicators (KPIs) and metrics that align with your goals and resonate with your audience. These KPIs and metrics should effectively measure the progress and outcomes related to your objectives, provide meaningful insights and support informed decision-making. Here are some considerations to make when designing the dashboard:

• Are you creating the dashboard for short-term operational targets (e.g., focusing on the current month/quarter), or do you want the dashboard to provide insights for the whole budget cycle? For example, a dashboard can also track sales versus forecast, sales quota achievements, etc.
• Are you creating the dashboard for operational teams or operational KPIs, or are you looking at enterprise metrics for the C-suite and board of directors? For example, regional management teams may require in-depth views of different markets, while the C-suite and the board of directors might be more interested in a dashboard showing daily revenue trends.
• Also, if you are creating multiple dashboards, it may help to create a template of a dashboard that contains a similar, coordinated layout. Next, use this template to create several dashboards as needed.

When designing the dashboard, there should be two tiers of information:

1. First-tier data should include KPIs that are critical to the business. For example, revenue trends, margins, pipeline, etc. These are KPIs that are not likely to change often.
2. Second-tier data may be KPIs that can change as the business changes its focus. Dashboards can include data for various business drivers, for example, pricing, marketing investments, forecast accuracy, etc. Dashboards should be flexible enough to accommodate short-term initiatives, and such flexibility can only result from proper planning at the onset.

It is important to align your objectives and target audience with your overarching business strategy and goals, while ensuring that your dashboard effectively supports them.

3. Collaborate with other functions to design the dashboard

To support different business functions in tracking their KPIs, FP&A professionals should work across all functions during the design phase. For example, in Fast-moving consumer goods (FMCG) industries, the forecasting of production and inventory levels are heavily reliant on sales forecast by each product segment.

On the one hand, the forecasting of product sales will roll up and become the sales forecast. At the same time, the same product sales will flow to the supply chain for use in production planning and inventory management. FP&A professionals need to understand how dashboards can provide each function with the data to align with their specific activities.

4. Implement dashboards

Once the team finalizes the design, the implementation of the dashboard requires the following:

1. Ensure data integrity and have one source of data

One common mistake is that different teams may use other data sources for the KPIs. For example, FP&A may use data from the accounting system to report marketing spend, while the marketing team may use their own system that aggregates campaign spending as their marketing spend. When different teams use different data sources to report on the same KPI, the differences can undermine people's confidence in the dashboard. Having the same definition of KPIs and also the same data source will ensure that functions are consistent in their reports.

2. Provide insights

Dashboards provide quantitative data. The FP&A team can provide comments and identify actions required to course correct. FP&A professionals can help link data points and advise management to take actions, or help different functions coordinate their efforts to achieve goals.

3. Utilize the dashboard

Dashboards are often created and shared but not used in discussions. The FP&A team should drive conversations or discussions using the dashboard, for example, during forecast reviews.

4. Exercise quality control

Ensure that dashboards go through a quality control process before they are shared with others, even within a team. The authority responsible for quality control may create and use a checklist that evolves all the time so that there is data integrity and factual checks.

Recent trends that are impacting the future of dashboards

Here are a few trends that are seen in terms of how FP&A dashboards evolve:

1. Increased involvement of FP&A teams in integrated FP&A

As integrated planning becomes more common, more functions will build dashboards to provide the next level of data. FP&A professionals must understand how this data is issued and keep track of data integrity to avoid disparities. This objective can be accomplished by working with different functions and incorporating data through "drilldowns" of KPIs presented in the higher-level dashboards.

2. Use of artificial intelligence (AI) to create dashboards

With the recent development and the explosion of interest in ChatGPT and similar resources, creating dashboards using AI will become mainstream due to the ease of use and speed at which dashboards can be created. AI can help in preparing dashboards or help provide the basic descriptive analysis (for example, describing variance against forecast or budget, calculating year-over-year growth). These can help save time and eliminate errors in calculations. However, it’s important to add a fact-checking process to all input achieved via AI sources.

You can use value-addition for the AI content. For example, FP&A professionals can provide more insights by providing context to the narrative, explaining how natural disasters impacted a particular market or anticipating how an external event (such as a strike) might affect upcoming sales performance.

3. Increased availability of self-service dashboards

With tools such as PowerBI and Tableau, more functions are building dashboards. FP&A can work with it and other teams to ensure that data sources are sandboxed. This will reduce the risks of data disparities in the creation of dashboards. FP&A should standardize the definition of KPIs and terms to minimize miscommunication.

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