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How To Use Dashboards To Improve Your Budgeting Cycle: KPI’s For Budgeting

by Michael P. Ziecheck, Manager, NCPD Solutions, htttp://www.visualmining.comMonday, November 08, 2010

Instead of using spreadmarts during the budgeting cycle, there is a new, better solution that provides several valuable benefits to organizations: the performance dashboard for finance and accounting.

The following dashboard uses several KPI’s (Key Performance Indicators) and illustrates these benefits:

  • Quickly seeing the significance of budgeting and forecasting data at a glance, resulting better informed and timelier business decisions.
  • Provide a central depository for all data, which immediately updates all visualizations for all to see simultaneously.
  • Removing the CPA (Copy, Paste and Assemble) routine common with the spreadsheet budgeting technique that ultimately lends itself to errors and “multiple versions of the truth”. 
  • View near real-time data updates with context sensitive drilldowns and rollups at every organizational reporting level to focus on any part – or the entire business – when and how you choose.

KPI Performance Dashboard

This dashboard displays 5 KPI’s to improve the budgeting process.  Let’s explore each of these in greater detail to appreciate their benefits.

KPI #1: YTD Revenue vs. Annual Goal KPI

KPI Chart

In our representative company, the fiscal year begins on July 1 and our view is through the 7th fiscal month ending January 31.  This gauge instantly conveys the company’s YTD actual revenue as compared with the annual revenue goal and is continually updated as new transactions are entered into our ERP system. 

With this KPI, management can quickly gauge how realistic their budgeting and forecasting has been compared with actual performance.

KPI #2: Net Income Forecast by Cost Center KPI

KPI Financial Chart

Management always wants to know how each department, or cost center, contributes to the net income forecast.  This KPI allows the selection of the top ‘X’ cost centers (in this case, the top four) and instantly conveys this important information.  As new data is entered into the forecast and next year’s budget, the KPI is immediately updated, so that when the user clicks on any bar, the graph drills down to the underlying transactions.

KPI #3: Budgeting and Forecast Variance KPI

KPI Forcast Table

The Budgeting and Forecast Variance KPI visualized in this table conveys a lot of significant data.  At a glance, colorful stoplight visual alerts based on comparative analytics indicate YTD actual versus budget and the forecast versus next year’s budget variances by line item. 

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