Founders/CEOs Are Improving the Bottomline with Financial Dashboards
Every Founder or CEO needs to master the Corporate Financial Management dashboard. It is the behind the scenes driver of every business!!
Corporate financial management can be enjoyable, easy, or overwhelming to corporate leaders regardless of years in business. What it boils down to is how you learn to manage and understand the business finances as an driver of business operations and financial stability. Do not think of managing the bank account is tedious and leave up to your finance or accounting team? It behooves you to meet frequently to understand its applicability to the corporate investments and the bank account bottom-line. This can be achieved by implementing a financial dashboard that provides key elements such as Cash Flow, Profit Margin, Revenue, Products and/or Services lists, and so much more. A simple financial dashboard can save you from surprises and steer your business toward growth. Here are the key metrics to track for effective Corporate Financial Management:
- Cash Flow:
(Movement of Money In/Out of the Company, e.g., Operations, Investing, Financing)
Know what is coming in (inflow) and going out (outflow). Even profitable businesses can fail if cash flow is mismanaged within any area of the company. Use tools like QuickBooks or Xero to track cash inflows and outflows weekly. Aim for a positive cash flow ratio of at least 1:1.
Print out your “statements” and get to know the company’s “financial health.” This is a fundamental part of corporate financial management.
- Revenue vs. Profit:
(Revenue – Money coming into the company during a specific timeframe from business activities prior to subtracting expenses)
(Profit – The remaining income (net profit or bottom line) after all accounting for income streams, debts, expenses, operating costs, and expenses)
Do not confuse high revenue with success. Track your net profit to see what you are truly earning. Monitor gross and net profit margins. Compare them to industry benchmarks and adjust as needed.
- Customer Acquisition Cost (CAC):
(Cost of Acquisition – The expense incurred to acquire a new client or asset purchase)
How much are you spending to acquire each customer or product (asset)? Compare this to their lifetime value (LTV) to ensure profitability.
What are the expenditure on corporate investments to this acquisition? What is the economic impact of the investment?
Understand the company’s revenue growth by breaking it down by product or service to identify high-performing areas is necessary for corporate financial management and business operations.
Getting started with corporate financial management is easy. Schedule some time with your Chief Financial Officer (CFO), Accountant, and/or Bookkeeper. If you do not have these individuals helping you in the business, now is the perfect time to think about the finance and accounting resources that are warranted to ensure that your business stays in the best financial condition.
Once you have a handle on things, then discuss with your key company leaders to ensure they understand how the dashboard numbers impact their respective business unit and numbers.
Learn More! Contact us to learn more about building effective dashboards.
Here’s some resources to help better understand corporate finances:
Corporate Finance Institute: CFI Courses
Corporate Finance for Dummies: Get the Book!