Financial models | Dashboards

The first impression and, consequently, a lot of the judgement made regarding the quality and accuracy of the financial model is made on what is commonly referred to as the model’s ‘dashboard’. At its very simplest, this is where all users should be able to find out everything that they need to know about the model at a first glance. In this article, therefore, we discuss what a ‘good’ dashboard looks like and how to best build one fit for purpose.

A dashboard is like a car dashboard: it tells the operator the important things to know, at that exact point in time. From the dashboard the user should be able to quickly understand what that model is trying to tell them and what the ultimate outcome is meant to be. Getting it right comes from understanding what stakeholders want and different stakeholders tend to have different needs. Albeit there are some baseline items that are involved, which typically revolve around 1) what is relevant, 2) what is immediate and 3) what is key in understanding the model.

The dashboards we build tend to be split into three key elements:

  • key inputs,
  • key outputs, and
  • ‘other’ information.

Depending on who we’re building the model for, those three areas may have different emphasis or levels of importance.

Key inputs

Ultimately, the things to include in the key inputs is best answered by identifying what the key business drivers are, or in other words, the buttons that someone wants to press to see what changes. For instance, if we think about the general inputs, over the next few years inflation, exchange rate variances and changes in tax are going to be key. Those sorts of big events that have a corporate impact have the potential to markedly change how the business is predicted to perform. Equally, the nature of the model and what it is designed to show will determine the key inputs here. For example, if the model is a growth model, then the inputs section of the dashboard will highlight the key growth assumptions, and for a turnover based model it will focus on turnover targets. From there the inputs then get very specific to the business and scenario.

Key outputs

Key outputs are going to initially centre around the financials. We’d expect to see (as a minimum) a high-level profit & loss, balance sheet and cash flow. What constitutes ‘high-level’ will differ depending on the business and the scenario e.g., if the business is straightforward, the model can probably get away with simply detailing turnover, profit and EBITDA for the profit and loss. However, if the business is more complex with multiple revenue streams, then the outputs may need to detail revenue by product, by department or by geography (for example). Similarly, regarding balance sheet items, if you have a capital intensive, fixed asset intensive model then the balance sheet is going to be more important and detailed. Whereas for service business models, fixed assets are unlikely to be the most important thing, instead it is more likely to be WIP, debtors, or working capital.

The output section is principally financial and KPI focussed. Once again, different users of dashboards will have different KPIs, but fundamentally this section needs to enable management to both understand and use the model, therefore they need to see similar KPIs to what they normally run the business on. Our suggestion is always to model as closely to what will happen in real life as possible, as it reduces the margin for confusion and error – not to mention avoid overcomplicated formula and model structures. Building it this way has the added bonus of enabling management to use it for monthly management reporting too.

‘Other’ information

The ‘other’ element will be determined completely by the scenario, and depending on the users of the model e.g., in growth capital transactions detailing funds flow or sources and uses is useful. That said, there are a couple of items that we would usually recommend including:

  1. A cash graph – including a cumulative cash graph can be valuable as it illustrates what has been happening, especially when you start reviewing a model after a build.
  2. Working capital mix/ net working capital – this item is always useful, particularly in deals that are going to be used for M&A as it helps to illustrate the business’ performance for sale when net working capital adjustments and debt free/ cash free adjustments are key.

By having these data items available in the model and already illustrated on the first page, a 3rd party user is guided to see what the business wants them to see and answering the questions before they are asked.


Do I need to include historical information?

In most model builds it is advisable to have 2-3 years of historical information built in as that way the modeller and intended audience can identify historical trends that then transition into forward looking data. If we take the example of the cash graph above, if there’s a cash graph that experiences some minor seasonal fluctuations of ~£250k, but then as it enters the forecast period it suddenly increases or decreases by £1m, then already there is a great visual check to be able to look back at against the assumptions. It is also a great visual to be able to pull out and include into an investment deck too.


Key questions when designing your dashboard

 Two useful ‘self-checks’ to consider when beginning the initial review of the model and dashboard are:

  1. Does this work for us and the business now? – fully-integrated models are typically built for one of two reasons: 1) as an operational model going forward, or 2) for a transaction or an event. Which one of those it is will determine the structure and content of the dashboard. However, in most transactions it can be beneficial to build the model for both. That way both the model and dashboard make sense on an operational level for ongoing management and reporting, and then the particular event is built on top.
  2. Is this clear? – the person building the model will know the model better than anyone and will know what it’s trying to show. However, they also need to be able to step back and ask:
  1. does this answer the question?,
  2. is it useful?, and
  3. can anyone pick this up and understand it?

Principally, it does not make sense or does not add value then it just looks cluttered and messy. If it does not add value to the picture or the scenario, then it should not be in the dashboard.

This article was written by Nathan Young, Strategic Corporate Finance Manager at Price Bailey. If you are looking for support in building a financial model for your business or transaction, then please get in touch with one of the team using the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.


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