Executive Dashboard Melissa Wood Consultant What We ll Cover 1. What kind of information can I find in the Executive Dashboard? 2. Set Up and Save Criteria 3. Using Graphs for More Detail 4. Analyze Financial Ratios
Executive Dashboard and Management Reporting What is the Executive Dashboard? The Executive Dashboard is a module that is primarily used as a canned drilldown tool. This tool allows you to start at a high level and then drill down into detail, all the way down to the transactions that make up the summary level data. This feature is nice for business owners, project managers, and accounting managers to assist in managing their aspects of the business with an easy-to-use tool. What kind of information can I find in the Executive Dashboard? Job Gross Profit o Job Summary Info Billing Detail Contract Detail Actual vs Estimated Cost Detail Change Order Detail Committed Cost Summary Committed Cost Detail Customer Information Job Information Change Order Summary/Detail o o o o o Approved Estimated Internal Pending Rejected Financial Income Statement o By Month/Year to Date o Over Under Billings / Work in Progress Cash o o Accounts Payable o By Job By Vendor Company Cash Balances Cash Flow by Job Accounts Receivable o By Job o By Vendor 1
Suggestion #1 Set up and save criteria. Set the criteria you will use, then on the toolbar, select Report > Save Criteria. Be aware that the criteria you choose will impact the data you see on the other windows. If you are not seeing the data you want or need to see, check the criteria. Also, if you are filtering by something like Project Manager and the project manager is not set up on the job, you will not get the information, so the data needs to be correct in the records that you are using to filter. FOUNDATION is all about the report criteria and the setup of the data. 2
Suggestion# 2 Click on graphs for more detail. 3
Suggestion# 3 Click on blue data to access drilldowns. Types of information you can drill down to include: Billing Detail Job Cost Detail Estimate Detail Change Order Detail Committed Cost Detail Committed Summary Detail See the Job Summary on the next page to see examples of the drilldowns. 4
5
Then you get this Then This 6
Then This You can drill down all the way to the transaction, and/or use the tabs at the top to go back. 7
You can drill down on the transaction to look at the transactional detail. Below is a screen shot of the Accounts Payable drilldown for this transaction. 8
Job Cash Flow Click on Cash tab, then click on the Company Cash Flow graph. 9
Managing your Jobs and Project Managers Look for the negatives, then drill down for detail or get on the phone and collect those receivables. Work on adjusting contracts with Approved CO s, budgets (revised costs) with Estimated CO s or get jobs billed to correct percent. If job shows more than 100% Complete, and should be 100%, create Estimated Change Order to make it match the Costs to Date. 10
Suggestion #4 Analyze your Financial Ratios Most businesses produce annual and monthly financial statements and comply with record-keeping requirements, yet financial statement analysis is often overlooked or not performed on a systematic and timely basis. Financial statement analysis is an important task, as it allows you to obtain insight into the financial performance of the business. Other businesses seek to interpret and assess their financial statements, but lack the tools to do so. Definition of Accounting Ratios The term "accounting ratios" is used to describe the significant relationship between figures shown on a balance sheet for a profit and loss account. This can be in a budgetary control system or any other part of the accounting organization. Accounting ratios show the relationship between accounting data. Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another. It may be expressed in the form of co-efficient, percentage, proportion, or rate. For example the current assets and current liabilities of a business on a particular date are $200,000 and $100,000 respectively. The ratio of current assets and current liabilities could be expressed as 2 (i.e., 200,000 / 100,000), 200 percent, or 2:1 (i.e., the current assets are two times the current liabilities). Ratios are sometimes is expressed in the form of a rate. For example, the ratio between two numerical facts, usually over a period of time (i.e., stock turnover is three times a year). Advantages of Ratio Analysis Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages/benefits of ratio analysis: 1. Simplifies financial statements: Ratio analysis simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business 2. Facilitates inter-firm comparison: Ratio analysis provides data for inter-firm comparison. Ratios highlight the factors associated with successful and unsuccessful firms. They also reveal strong/weak and overvalued/undervalued firms. 3. Helps in planning: It helps in planning and forecasting. Ratios can assist management in its basic functions of forecasting. Planning, coordination, control, and communication are all impacted. 4. Makes comparison of different divisions possible: Ratio analysis also makes the comparison of the performance of different divisions of the firm possible. The ratios are helpful in determining efficiency, as well as past and future performance. 5. Help in investment decisions: Ratio analysis helps with investment and lending decisions. Limitations of Ratio Analysis Ratio analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations. 1. Limitations of financial statements: Ratios are based only on the information that has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived from financial statements are also subject to those limitations. For example, non-financial changes though important for the business are not relevant to the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements. 2. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparisons only provide a glimpse of the past performance. Additionally, forecasts for future may not be correct, since several other factors, like market conditions, management policies, etc., may affect the future operations. 11
3. Ratios alone are not adequate: Ratios are only indicators. They cannot be considered final when determining the good or bad financial position of the business. 4. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case, the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, need to be adjusted, while keeping price level changes in mind, if a meaningful comparison is to be made through accounting ratios. 5. Lack of adequate standard: There is no fixed standard that can be laid down for ideal ratios. There are no fully accepted standards or rules of thumb for all ratios that are accepted as norm. This makes interpretation of the ratios difficult. 6. Limited use of single ratios: A single ratio does not usually convey much of a sense. To make a better interpretation, a number of ratios have to be calculated, which can confuse the analyst, rather than help them in making a good decision. 7. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to be interpreted and different people may interpret the same ratio in different way. 8. Incomparable: Not only do industries differ in their nature, but the firms of a similar business also widely differ in their size and accounting procedures etc. That makes the comparison of ratios difficult and misleading. Common Financial Ratios Liquidity Measures Calculation Comfort Range Number Days Cash Cash + Equivalent x 360 Annual Revenue 7 Days or More Accounts Receivable Turnover Credit Sales Average Accounts Receivable 60 Days or Less Accounts Payable Turnover Accounts Payable x 360 Cost of Earned Revenue 45 Days or Less Quick Ratio Current Ratio Working Capital to Backlog Ageing of Accounts Receivable and Payable Average Daily Account Balances Cash + Eqv + Net Receivables Current Liabilities Current Assets Current Liabilities Working Capital Cost to Complete Backlog Greater than 1.2 times 5-10% or Greater 60 Days or Less Varies as to size and industry 12
Net Worth Measures Calculation Comfort Range Debt to Net Worth Total Debt Net Worth 2.1 to 3.1 Fixed Asset to Net Worth Fixed Assets Net Worth 10% to 40% Net Worth to Backlog Net Worth Cost to Complete Backlog 5% to 10% or Greater Sales to Net Worth Annual Revenue Net Worth 10 Profitability Measures Calculation Comfort Range Gross Profit on Sales Gross Profit Annual Revenue Varies as to Industry Overhead to Sales G & A Expense Annual Revenue Varies as to Industry Overhead to Net Worth G&A Expense Net Worth 60% or Less 13
Net Profit Before Taxes to Sales (NPBT) Net Profit Before Taxes Annual Revenue 15% or Greater Return on Equity Net Profit Before Taxes Net Worth of Prior Year 5-10% or Greater Understanding/Calculating Working Capital Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business. Along with fixed assets, such as plant and equipment, working capital is considered a part of operating capital. It is calculated by taking current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Working Capital = Current Assets Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable, accounts payable, and cash. Current assets and current liabilities include three accounts that are of special importance. These accounts represent the areas of the business where managers have the most direct impact: Accounts Receivable (current asset) Inventory (current assets) Accounts Payable (current liability) The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long-term assets. Common types of short-term debt are bank loans and lines of credit. An increase in working capital indicates that the business has either increased current assets (received cash or other current assets) or has decreased current liabilities (paid off some short-term creditors). 14
Understanding/Calculating Net Worth The "net worth" of a business is what remains after total liabilities are deducted from total assets. If total assets are $1 million and total liabilities $800,000, net worth will be $200,000. Ratio Definitions - Liquidity Ratios Cash Balance Ratio The Cash Balance Ratio is also referred to as Days Cash Balance. The cash balance ratio indicates the number of days that a company can pay its debts out of current cash as the debts become due. Accounts Receivable Turnover This is the ratio of the number of times that accounts receivable amount is collected throughout the year. A high accounts receivable turnover ratio indicates a tight credit policy. A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts. Current Ratio The current ratio is used to evaluate the liquidity, or ability to meet short term debts. High current ratios are needed for companies that have difficulty borrowing on short term notice. The generally acceptable current ratio is 2:1 The minimum acceptable current ratio is 1:1 Quick Ratio aka Acid Test Ratio The quick ratio is used to evaluate liquidity. Higher quick ratios are needed when a company has difficulty borrowing on short term notice. A quick ratio of over 1:1 indicates that if the sales revenue disappeared, the business could meet its current obligations with the readily available "quick" funds on hand. A quick ratio of 1:1 is considered satisfactory unless the majority of "quick assets" are in accounts receivable and the company has a pattern of collecting accounts receivable slower than paying accounts payable. Working Capital = Current Assets Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable, accounts payable, and cash. Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact: Accounts Receivable (current asset) Inventory (current assets) Accounts Payable (current liability) The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to current assets and is often secured by long-term assets. Common types of short-term debt are bank loans and lines of credit. An increase in working capital indicates that the business has either increased current assets (that is received cash, or other current assets) or has decreased current liabilities, for example has paid off some short-term creditors. 15