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The use of spreadsheets has been ingrained in the DNA of financial reporting. Jason Gabauer, Controller at Halstatt, shares the barriers to cloud adoption, the importance of dashboard consolidation, and the KPIs you should be tracking.
FEI Daily: What are the biggest benefits of financial dashboards for finance teams?
Jason Gabauer: For us it's quick and accurate decision making. When you choose something and you get into the dashboard programs what you're looking for is something that's efficient, effective, and accurate, but the ability to make quick decisions is important. A lot of investment firms really look at off-market deals or deals that have not necessarily come to the market yet and the ability to pull up data at any point in time across different disciplines. A CEO may look at one set of data, a chief investment officer another set of data, and I’m looking at a third set of data.
The ability for dashboards to pull all that information and construct that view for each different discipline or section within a firm is critical. The timing of it becomes critical as well because a lot of times you get a very short turnaround for those off-market type deals. There's a lot of benefit to those because you haven't gotten into a bidding war or something of that nature, or you found the right seller and you want to take a strategic advantage of it, so having that information becomes critical.
FEI Daily: Are dashboards typically a part of organizations’ cloud adoption today?
Gabauer: I look at it as kind of twofold. I would say, yes. I think if it's not it should be because it does give you a lot of flexibility. People are still very reliant on spreadsheets. That jump to relying on the software in the cloud to do the spreadsheet work for you has been a difficult jump to make for a lot of executives and those that are putting the information together for the executives to look at. People become comfortable with Excel because it's been ingrained in the DNA of financial reporting for so long. Change is difficult and you kind of have to ingrain any type of change like that in the DNA of your company. I think that's the biggest thing that has to happen in order for the dashboards to take hold. The other piece is just being diligent on the dashboard. They don't run themselves. They do a great job but you need to pay attention and make sure you understand how the software itself works. It's just different technology and I think that's probably the biggest barrier.
FEI Daily: What are the KPIs a CFO dashboard should have?
Gabauer: It varies based on the firm, but I will tell you for me the most important one (from an investment firm perspective) is your value. What's our year over year? Our IRR, if you will.
Then I think it's important for your financial controllers and your CFOs expenses, right? Now you're getting into your traditional financial statements of what are your revenues, what are your expenses? If you have operating companies, you're going to want to understand your cash flow so your cash flow is going to become very important. We use the traditional financials to see what our expenses look like in a traditional P&L and it allows us to manage our expenses and our operating capital from that piece.
Then the third piece is your leverage. Is your portfolio leveraged or are you short? Then you really know what your debt and your ratios look like. Those are the high-level big ones that I would expect that you would want. Then of course as you go further down depending on what you're looking at you can have other stuff on there. You can look at your balance sheet and certain pieces of your balance sheet. From an executive position those are the ones where I want to be able to pull up at any point in time. To be able to say this is where we're at, this is where the firm's at. Also, if you construct the dashboard the right way you can really see what your portfolio mix is as well. Those key information indicators at the beginning that we just talked about, each one of those can be looked at in multiple ways.
FEI Daily: What are the challenges that dashboards can help solve?
Gabauer: Quick information. Information that's always updated. One of the nice things about having a dashboard attached to software is as you make entries or update that software it should update that dashboard. When you have a potential deal that you got short notice or you have a potential investment to make or a decision to make, you don't have to go back and recreate entire Excel spreadsheets, updating certain days or certain weeks of a spreadsheet, and you're not reliant on all these formulas that inevitably cause problems.
Then accuracy. We live in a very fast-paced world. One of the things that scares me about the spreadsheet world versus the dashboard world is it takes one zero to make a million, 10 million, and now you have a nine million dollar problem.
FEI Daily: Where do you begin when it comes to implementing a dashboard? What's the first step?
Gabauer: I would say the first thing you need to do is have somebody that's fairly creative and open-minded. You're going to have your CFO, your controller, your CEO that's going to have what they want. It's about understanding what senior management and the board of directors needs. It's understanding what information has to be provided and then the next piece is somebody with a creative mind that likes to explore software, that thinks outside the box on how to use it.
One of the constraints that you see is that someone looks at it and says, "Well we can't do that because we did it in Excel and there's no way to do that in the software." You have to have somebody that's a change agent, that looks at everything a little bit different to put the dashboard together.
That's the key person in that process. They're going to need to know the software, they're going to have to be able to interact with senior management or be part of senior management, one of the two, but then also have that same skill set to be able to deal with lower level employees that are going to be more into the details of the information you're trying to consolidate up to senior management. They really become a go-between between your employees versus your senior management and finding that particular person is probably where you would start first and also probably one of the bigger challenges.