How to build a financial statement analysis dashboard that delivers information and insight

Staring at a blank financial statement analysis dashboard can seem daunting. It’s easy to swing in confusion between “What do I add?” and “Is that too much information?”

We created this guide to help you learn more about how to build and use an effective  financial statement analysis dashboard in your business (or improve it if you already have one). There are many different types of financial dashboards that companies can use to track various aspects of their business, so let’s start with a basic definition. 

What is a financial statement analysis dashboard?

A financial statement analysis dashboard is a specific type of financial dashboard for visualizing and interpreting data from your balance sheet, income statement, cash flow statement, and other financial documents. Think of a financial statement analysis dashboard as your data aggregation assistant.

Unlike more general financial dashboards that track operational metrics like sales performance or budget variances, a financial statement analysis dashboard focuses specifically on analyzing the relationships between financial statement components to evaluate your company’s overall financial health and performance trends.

The data for a financial statement dashboard typically comes from your accounting software through an integration with another tool, like Drivetrain, that provides a broader set of financial analysis and reporting capabilities—one that allows you to build dynamic, interactive dashboards—as opposed to one you have to periodically update manually.   

With dashboards, you’re applying key financial analysis techniques to transform your raw financial statement data into meaningful visualizations that highlight patterns, anomalies, and potential areas of concern. 

Suppose you expect a bit of liquidity turmoil over the next quarter. In preparation, you’re tracking the current ratio using a financial dashboard. The moment your current ratio breaches a threshold you’re comfortable with, you take corrective action to inject additional liquidity by getting a line of credit.

On the other hand, the liquidity problem might have caught you off guard if you had not monitored the current ratio using a financial statement analysis dashboard.

Real-time visibility of financial data is one of the key benefits of a financial statement analysis dashboard. Speaking of which…

Benefits of using a financial statement analysis dashboard

There’s a lot to gain from using an interactive financial statement analysis dashboard. Here’s an overview of the benefits:

Strategic decision support

When you have a strategic financial question, your dashboard should have the answer for you that’s backed by hard data. The data in your dashboard should give you all the information you need to make smarter decisions. 

Need to take debt? Look at your debt-to-equity ratio. Need to refinance your loan? Look at your weighted average cost of capital and see how that will change on your dashboard.

Comprehensive financial health assessment

Dashboards are the successors of old-school reports but are interactive, real-time, and comprehensive. They give you an at-a-glance view of key financial aspects, such as liquidity, profitability, solvency, and more, and let you dig deeper when needed.

Zero-effort ratio analysis

Manually calculating ratios on spreadsheets is a good way to reminisce about the 90s. However, a modern CFO must automate the process to save time and keep errors out of calculations. A financial dashboard helps you track key ratios in real-time without manual effort.

Trend identification and forecasting

A great dashboard tells you more than what happened over the past quarter. It also gives you insights into the future by identifying patterns in revenue, expenses, cash flow, and margins. Financial planning systems with a dashboard feature use historical data to predict future performance. If you’re about to run into a cash crunch, your FP&A software will let you see that iceberg before the ship hits it.

Performance benchmarking

To stay ahead of the curve, look at how you’re doing compared to competitors. That’s where benchmarks help. 

A dashboard with benchmarking capabilities helps compare your metrics against industry standards and internal benchmarks. Translation? It allows you to make benchmarks actionable, using the insights they provide to channel your efforts in the right direction when planning a strategy to stay or get ahead of competitors.

Early warning system

Traditional processes are designed to notify you about financial problems after preparing quarterly reports. What you need is an early warning system, and that’s where dashboards can help. 

You can set threshold alerts for key metrics like cash flow dips, rising debt ratios, or declining margins, among other things. Whenever a threshold is breached, the dashboard system notifies you, which gives you enough time to take corrective action.

Stakeholder communication

Communication is the foundation for good investor relations and relationships with other key stakeholders. Your board, investors, and executives don’t need a line-by-line breakdown of operating expenses. They want a well-designed dashboard that presents operating expenses as snackable bits of information, possibly with customizable views that allow them to look at the data they want the way they want. A

Audit preparation

Audits are a CFO’s least favorite time of the year, and for good reason. However, a well-structured dashboard can make the process less painful. The most prominent advantage? They make it easy to retrieve information faster during the audit. 

But that’s not all. Even during the accounting period, dashboards help identify discrepancies, allowing you to address problems proactively and reduce the risk of a last-minute surprise.

Key features of a financial statement analysis and reporting dashboard

A good financial statement analysis and reporting dashboard needs the following key features:

Multi-statement integration

As the name suggests, a financial statement analysis dashboard should incorporate data from all three of your core financial statements, the P&L and cash flow statements and your  balance sheet. However, it should also integrate them in ways that provide key insights and  quickly give you an overview of your financial position. 

For example, if you’re building a valuation dashboard, you can pull the operating cash flow and capital expenditure from your cash flow statement to calculate free cash flow when using the discounted cash flow model or dividends paid from the statement of retained earnings when using the dividend discount model.

Ratio visualization and tracking 

Ratios are staples in a financial analysis dashboard. Add charts and other interactive elements to track key ratios. Most dashboard systems support this feature, but the best ones offer more interactivity and a wider range of visual elements.

Scenario modeling

A scenario planning tool is like a crystal ball for your financial statements. Bake in a few assumptions, pull real-time data from your dashboard, and let the scenario planning tool crunch the numbers and generate forecasts.

Drill-down capabilities

Robust visualizations simplify data, but the dashboard must provide transaction-level data for occasional transactions requiring further investigation. The range of capabilities varies, but top FP&A systems like Drivetrain typically offer drill-down capabilities.

Customizable time frames

A dashboard's primary use case is tracking financial data. To serve this purpose, it must present data across a specific time frame. 

Statement reconciliation monitoring

Manual reconciliation is the perfect way to make the process error-prone. Consider choosing a dashboard software that matches transactions and balances automatically and identifies and reports discrepancies—no human effort, no costly errors.

Different types of dashboards you can create for financial statement analysis

The data in your dashboard depends on the type of dashboard you want to build. Let’s go through a few common examples of dashboards.

Balance sheet analysis dashboard

The balance sheet analysis dashboard provides a visual representation of data related to assets, liabilities, and equity. This is where you’ll find insights on liquidity, leverage, and overall financial position.

Here are some examples of key financial ratios you can use on your balance sheet analysis dashboard:

• Liquidity ratios: Current ratio, Quick ratio, and Cash ratio
• Solvency ratios: Debt-to-equity ratio and Debt-to-assets ratio
• Efficiency ratios: Accounts receivable turnover, Inventory turnover, and Asset turnover ratio
• Profitability ratios: Return on equity, Return on assets

Income statement analysis dashboard

The income statement analysis dashboard aggregates information about your company’s financial performance. This includes profitability and transactions that impact it, such as revenue and expenses.

As with balance sheets, there are some key financial ratios you can add to your income statement analysis dashboard to make it more effective:

• Profitability ratios: Gross profit margin, Operating profit margin, and EBITDA margin
• Efficiency ratios: Revenue per employee, Operating leverage, Break-even point
• Growth ratios: Revenue growth rate, Net income growth rate, Earnings per share (EPS) growth rate
• Expense management ratios: Interest coverage ratio, Effective tax rate

Financial ratio analysis dashboard

The financial ratio analysis dashboard gives you an overview of financial ratios across multiple aspects, such as cash flow, liquidity, profitability, and more. It’s essentially a statement-agnostic, all-inclusive dashboard that focuses on financial ratios.

While there are plenty of ratios you can track, consider focusing on the ones that matter the most to you to keep your dashboard clutter-free. Here are some examples of metrics you can add to your dashboard to track various aspects of business:

• Liquidity: Cash ratio
• Solvency: Debt-to-equity ratio
• Profitability: Net profit margin
• Asset efficiency: Asset turnover ratio
• Cash flow: Operating cash flow
• Valuation: Price-to-earnings
• Debt coverage: Interest coverage ratio

Cash flow analysis dashboard

A cash flow analysis dashboard compiles real-time data to provide a visual representation of your company’s cash inflows and outflows. If your goal is to optimize cash and forecast financial stability, this is where you go.

A few examples of financial ratios and other metrics that you can add to a cash analysis dashboard include:

• Free cash flow to equity
• Free cash flow yield
• Debt service coverage ratio
• Cash turnover ratio
• Cash conversion cycle
• Cash burn rate

How to create an effective financial dashboard

Dashboards are your company’s financial pulse monitor. Investing the time in designing a dashboard that helps you make faster, smarter decisions is worth it. If you’re designing a financial dashboard from scratch, here’s some guidance on making it effective.

Step 1: Set clear analysis objectives

Define your goals before you start designing the dashboard. 

Are you trying to track liquidity, avoid cash flow disasters, or measure profitability? This will tell you the information to include in your dashboard. For example, if your priority is cost control, focus on tracking operating expenses and profit margins.

Step 2: Select the right financial statement components and ratios

Not all metrics matter. Based on your goals, choose high-impact KPIs that give you insights into areas like liquidity, solvency, profitability, cash health, and more.

Step 3: Incorporate comparative data

A single number means nothing without a baseline. When designing your dashboard, consider adding comparative data. The comparison could be across time periods, with industry benchmarks, or between budget and actual figures.

Step 4: Design compelling visualizations

Your dashboard shouldn’t look like a wall of numbers. Make it instantly readable with bar charts for comparisons, trend lines for comparisons over time, and heatmaps for anomalies. 

As a best practice, avoid adding more than 7-10 KPIs on a dashboard.

Step 5: Build in drill-down functionality

Dashboards are for quick insights. Adding unnecessary details leads to clutter, but occasionally, you might want to dig deeper. For example, if your revenue drops, you might want to investigate which product lines tanked, potential pricing or volume issues, or what is driving churn.

To do this, you need to make your dashboard interactive with the ability to click on different charts and tables to view the underlying data. It’s worth noting here that it is possible to create interactive dashboards in Excel with its built-in charting capabilities, pivot tables, slicers, etc. But, it’s a whole lot of work. More importantly, your dashboard will only be as current as the last time you updated all your financial statements (last month, last quarter or...last year?). 

To fully leverage your financial statement dashboard or any other, you need software that is easier to use and far more robust than Excel. Using a platform like Drivetrain, which not only provides drill-down capabilities built in but also automatically updates your dashboard in real-time is key to fully leveraging the powerful benefits a financial statement dashboard can have for your business.  

Step 6: Implement alert thresholds

Your dashboard should warn you when things go south. If you’re working with a software like Drivetrain, you can make your dashboard even more powerful by setting up alerts that notify you whenever a metric or balance, such as debt-to-equity, gross margin, or cash balance, breaches the desirable threshold. If you’re learning about financial disasters from your accountant after the quarter ends, your dashboard isn’t working.

Another note on the limitations of spreadsheets...You can set up popup alerts in Excel, but they’re not nearly as powerful because they only appear when you open up your spreadsheets and dashboards. Building them also requires a lot of time and technical expertise with Excel’s developer tools. If you want real-time visibility into your financial performance and automated alerts where you’ll actually see them (e.g. email, Slack, etc.), you need a more robust system.

Step 7: Ensure regular data updates and reconciliation. 

Don’t let your dashboard get by with last quarter’s number. To make decisions at the right time, you need real-time data. 

Using a financial reporting software or a more comprehensive financial planning and analysis (FP&A) software like Drivetrain, will make it easy to integrate with any accounting software and other systems you use, to sync your data in real-time. With updates as often as you need them to ensure that you’re never unpleasantly surprised.

What are the common mistakes to avoid when building your dashboard

It’s easy to make errors when preparing your first dashboard. Here are a few common mistakes you should know to steer clear of errors:

• Focusing on too many metrics without clear priorities: Use your dashboard to track metrics that matter. Drowning in a sea of metrics slows down decision-making.
• Neglecting industry context and benchmarks: When building your dashboard, don’t neglect benchmarks because they add context. For example, 40% gross margin might sound great unless you’re in an industry where 60% is the average.
• Using inappropriate time periods and analysis: Quarterly data won’t help you catch a cash flow crisis brewing in the next two weeks. Align times with your strategic objectives to make sure you’re always prepared.
• Ignoring interrelationships between financial statements: Financial statements are related. Even if your net income looks top-notch, your cash flow might be gasping for air. Make sure you’re mindful of this when designing your dashboard.
• Inadequate data governance: Your dashboard is only as reliable as the data feeding it. If financials treat data governance as an afterthought, you’ll see inconsistencies and errors, which can take a lot of time to investigate and explain.
• No drill-down capabilities: Even a perfect financial dashboard can’t deliver enough value if it can’t let you dig deeper into the finer details of transactions. Make sure you choose a financial dashboard system like Drivetrain that offers comprehensive drill-down capabilities, ideally to transaction-level data.

Ready to build a financial dashboard for your business?

Financial statement analysis dashboards can be a gold mine of data that supports more informed financial decision-making. They give you the information you need when you need it and ensure you’re prepared for potential problems coming your way.

The one thing you need to do right? An FP&A software that provides integrations with all the systems that hold the data you need for financial statements, and a rich feature set for financial reporting, including the ability to easily build interactive, dynamic dashboards that automatically update in real time. That’s Drivetrain. 

With Drivetrain, creating a dashboard is quick and easy (and actually, pretty fun).  Learn how Drivetrain compares to other solutions before you choose your new dashboard-building system. You'll be glad you did.