Cash Management Dashboards and What KPIs to Track

Your business's cash flow is like its lifeblood. You can't have a business if you don't have cash flow. That is why you must regularly monitor your company's health, in other words, its cash flow. And this is where cash management dashboards come into play.

Your cash flow dashboard, like a heartbeat monitor, allows you to track important metrics for your business. It allows you to monitor every move of your business and help in its overall success. This article will explain what a cash management dashboard is and what KPIs are tracked on it.

What Is a Cash Management Dashboard?

A cash management dashboard tracks a company's immediate spending power and cash. It is a collection of indicators used to monitor your company over time that will tell you how you're doing and quickly reveal variations that may require corrective action.

Because of the timing of income and expenditure, revenue models do not always reflect a company's immediate cash position, that's why company owners and finance directors must track cash flow separately from revenue.

Cash and liquidity dashboards display real-time data from cash reporting and forecasting processes and systems that are most important to businesses and their audiences. Furthermore, they concentrate all of their attention on a single version of the truth that is simple to understand and digest.

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Dashboards can also be rolled into reports and distributed to relevant stakeholders at any time, with the option to take a high-level view or drill down to the most granular level of detail. Companies must first determine which key performance indicators (KPIs) most accurately reflect their financial performance and thus qualify for dashboard treatment. Then, creating and updating a spreadsheet on a regular basis will provide you with the data you need to build your cash dashboard.

Always begin with financial projections that reflect expected monthly inflows and outflows, including major anticipated purchases and financing, for a better overall cash flow analysis. Then, using your spreadsheet, compare your projected results to the actual results. The following are the metrics many businesses put on their cash management dashboard:

Consolidated Actual and Forecast Cash Positions

Large businesses, particularly those with a global presence, frequently struggle to maintain an up-to-date, single-currency centralized cash position that shows both current cash levels and forecast cash levels at various points in the future. Given the number of subsidiaries and bank accounts involved, this is completely understandable.

However, because bank data and forecasts are fed directly into the dashboards, a real-time view of daily consolidated actual and forecast cash positions is available with a single mouse to click. These consolidated actual and forecast positions, along with the data associated with business units, bank accounts, and many other aspects of the company, serve as the foundation for all other cash reporting.

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Total Actual and Forecast Available Liquidity

The sheer number of moving parts makes calculating current and forecast liquidity difficult, but not impossible. External sources of available liquidity are layered on top of internally available cash reserves in liquidity reporting. Companies tapped these liquidity reserves in large quantities during the peak of the COVID-19 pandemic, scrambling to add another layer of security by converting as much of them as possible into cash.

Most large corporations will have multiple sources of external liquidity spread throughout their operations. That's why cash management dashboards must aggregate these liquidity sources and then combine them with cash reserves to show total available actual and forecast liquidity.

Cash Walkthrough

Monitoring your cash flow is one of the most effective ways to improve your company's financial health. A cash walkthrough enables businesses to visualize each step of the process from an opening cash balance to a closing cash balance. That's why a cash walkthrough is a vital element you should put on your dashboard.

The journey of the cash walkthrough track is divided into stages that show how the net cash balance has changed, both positively and negatively. Headline cash inflow categories, such as customer receipts and investing inflow, should be color-coded on a graph to visualize the salient data. The primary cash outflows, which may include supplier payments or tax, are also important.

The primary advantage of visualizing data in this way is that it emphasizes the impact that each cash flow category has had on the cash balance. A cash walkthrough graph, for example, would allow a treasurer or financial planner to quickly identify that supplier payments had offset the combined contribution of customer receipts, investing inflow, and dividend receipts.

Another step you can take for easier cash management is having an online business checking account. It is an ideal choice that provides a more secure and faster payment for your business.This account helps businesses access their revenue hourly which can help see what is happening with all their payments and allows them to make free transfers.

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Net Debt and Covenants

Cash and drawn liquidity are critical components of net debt calculations and, ultimately, covenant calculations. Significant changes in cash flow over a short period of time, or more gradually over time, have a significant impact on net debt and covenant levels, especially if underlying earnings are declining.

This will most likely limit a company's ability to access liquidity and use the cash generated in the manner intended. Therefore, due to their significance, net debt and covenant figures must be displayed prominently on the dashboard for all relevant stakeholders to see.

Variance and Actual versus Forecast Analysis

Highlighting actual versus forecast differences and variances on a dashboard used by executives and other senior stakeholders may appear counterintuitive. However, if handled properly, it can significantly boost the credibility of both the overall cash reporting process and the dashboard itself. Furthermore, highlighting and explaining a large variance puts the dashboard's owner, typically the head office finance or treasury team, in control of the process by preventing inevitable questions from being asked. Including high-level forecast variance analysis on the dashboard helps all users understand the major factors influencing forecast accuracy and ensures that the data quality is constantly monitored.

Ultimately, a cash management dashboard is the common denominator when it comes to many of your business problems. Their importance is vital as they provide businesses with a clear path to investigate and comprehend their financial past, present, and future.