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Using Financial Dashboards for Operational Management

Matthew Lange
Educational Opportunities: 
Grain, Dairy, Swine, Beef, Young, Beginning Farmers, Specialty Industries, Women in Ag
Home > Education & Events > June 2017 > Using Financial Dashboards for Operational Management

Dashboards are really important tools that we use in our daily lives. Just as a dashboard in a vehicle tells us the speed we're going, monitors our fuel in the gas tank, and even nowadays tells us when we need our next oil change, so to do dashboards in business monitor our performance and productivity.

There are dashboards such as yield monitors, equipment efficiency monitors, systems that track average daily milk weights, and a variety of other systems. Many companies and services providers offer software packages that incorporate these dashboards into their systems. Well, what about financial dashboards, specifically treasury management. Being able to quickly assess our business' cash position and truly understand our cash obligations are critical and essential elements to managing our daily business functions.

You can create your own dashboard with a simple spreadsheet and some of these few key items that we have listed here. Let's take a look at them. One of the items that I would track on a regular basis would be the checkbook balance, something as simple as every week or every month, tracking what is that balance and where's it at? Is it trending upward? Is it trending down? What are the impacts on this checkbook? How much do we have flowing through that, through what parts of our business, and are we using that versus an operating loan to meet our bill payments and other expenses?

The second item is our operating loan balance and availability. With the operating loan it's not just where our balance is today, but if we do have some availability, how much do we have available to us? Is the operating loan also coming due? Should we be speaking to our lender about renewing that or are we going to have the ability to either pay this down or not pay it down are critical elements as we move forward.

The third item are payables and receivables. Payables are those bills at the end of the month or at the end of the period that were left unpaid. Typically, most businesses have thirty day payables but it's important to track not just where payables are at on the thirty days but those beyond that, those that maybe have built up over time. Who do we owe, how much do we owe them, and when should they have been paid are all items that we should track under payables. In receivables, that's how much money is potentially still owed to us, typically in a dairy this might be the milk check receivable. Those items are important to track how much cash will be coming into the business.

Lastly, we can take a look at our non-monthly or what I call seasonal types of expenses. These are the items that really hit our cash flow. On the positive side, maybe we're going to sell some soybeans here in the next couple of weeks. That'll bring a lot of cash in. Maybe we have a government payment we're expecting. On the other side of the ledger, maybe we have a large custom operating bill that's due. Maybe here in a few weeks we need to pay our year's land rents. Maybe we still have some manure hauling that we're going to have to cover here before the end of the year. These types of cash inflows and outflows will help us to cross check with our checkbook and operating to see if we have enough cash to meet those obligations.

Consistency of information, continuous monitoring, and taking action on this type of dashboard system is critical and essential to our business. This is just a starting point. It's important that you as an owner or manager sit down with your account or bookkeeper to create and customize a dashboard that works for you. Don't wait until the check engine light comes on to deal with cash issues in your business. Take action now, work with your lender, and monitor this performance on a continuous basis.

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