I have a love-hate relationship with financial dashboards. The longer a specific report has been in use, the more likely I am to find a stagnating metric. You see, dashboards have a magical power to keep numbers in check, which on one hand is intentional, but on the other hand – corrosive.

Dashboards are tools designed to convey a summary of information to busy owners or executives. The typical weekly dashboard will show cash on hand, receivables, weekly billings, and payables. Dashboards are generally user-defined, so if the intended user is focused on overtime hours, then that will be reported.

Here’s the problem: Standard financial reports focus on the symptoms instead of the problems. For example, overtime is not a problem. Unnecessary overtime is.

And once a symptom is called out, it gets managed. Managing overtime means there will be less, which will make the report look better. That’s good, right?

I don’t have to dig deep to find examples from my client base where managing overtime led to reduced sales. “We can’t service this last-minute request because…overtime.” Or, “We can’t work past five o’clock and finish this project. Let’s bring the entire crew back tomorrow for eight hours and complete two hours’ worth of work.”

OK, I am getting snarky, but you get my point.

There are better metrics to rotate on to your dashboard for a while, and here are three of my current favorites:

1. Change Order Capture

Show me a report of how many change orders were billed this week on current or finished projects. I know that the problem for most companies is all of the changes that weren’t captured, but bear with me. If I see a report each week that only reflects half of the change orders I have heard about – what might I do as a manager?

Hopefully, I will wander around and chat with the folks that chose not to bill for something and make some adjustments to their decision criteria. Small steps. Big results.

2. Time to Invoice

How long from the completion of a project to final invoice? Days? Weeks?! I could tell you stories.

My dashboard would have a running total of completed but un-billed revenue and the average number of days past completion. This would also give me an average un-billed per days outstanding.

In a company with only a handful of transactions per week, I might itemize this list. That would be a useful thing to have on hand while you are visiting salespersons and project managers to find out why they aren’t closing out their projects.

3. Labor to Materials Billed

One of the easiest ratios to track is labor revenue to materials revenue. Materials could be product sold or rented.

When I review a company’s finances for the first time, this is the number I want to see. It tells me a lot about how the business makes money, how they present value to the customer, and where they sacrifice on price.

For instance, a full service event production company that averages 30% labor to 70% materials is probably discounting labor. However, in a specialized technology rental business – this ratio might be healthy.

Non-Financial Thinking

There’s a time to think like a financial person and a time to analyze like an entrepreneur. Financial reports by definition look backwards at what has happened. If we manage to the metrics, then the reports will show that everything is fine, which it never is…

We also need metrics that explain what needs to be done.

If your dashboard says everything is fine, change it.