Every business owner needs a clear understanding of their business dashboard. Digital Masterjee Professor Vishal Thakkar explains how this dashboard helps track performance, predict the future, and make informed decisions.
Why Is a Business Dashboard Important?
A business dashboard provides critical insights. It helps you:
- Monitor key financial ratios
- Analyze past, present, and future performance
- Make better business decisions
Key Business Indicators
Every business has three types of indicators:
- Forecasting the Future – Predict future trends based on current performance.
- Understanding the Present – Know the current financial status of your business.
- Evaluating Past Performance – Analyze last year’s profit and loss (P&L), balance sheet, and cash flow.
Ratio Analysis: The Four Key Ratios
Ratio analysis plays a major role in business decision-making. It is divided into four main categories:
1. Liquidity Ratio
This ratio shows the money rotation within the business. It helps determine if a business has enough assets to meet short-term obligations.
- Current Ratio = Current Assets / Current Liabilities
- Current assets include inventory, receivables, and cash.
- Current liabilities include provisions, taxes, bank overdrafts, and cash credit.
- Ideally, current assets should be twice the current liabilities.
- Quick Ratio = Quick Assets / Current Liabilities
- Quick assets = Current assets – inventory
- It measures whether a business can meet its short-term liabilities without selling inventory.
- Acid-Test Ratio
- This ratio shows how much money is available in the bank to cover liabilities.
- A strong acid-test ratio ensures the business can pay suppliers, taxes, and dividends.
2. Solvency Ratio
This ratio determines if the business is financially stable in the long run. It helps assess whether a business is at risk of insolvency.
3. Profitability Ratio
It indicates how much profit the business generates. A high profitability ratio means the business is financially strong and prepared for growth.
4. Efficiency Ratio
This ratio measures how efficiently a business operates. It tracks how well assets and employees are utilized for maximum productivity.
How to Use the Business Dashboard
A well-managed dashboard helps business owners make informed decisions. Each ratio provides an indicator of business health. By analyzing these ratios, business owners can:
- Control current assets daily
- Track inventory and cash flow
- Strengthen relationships with key customers and suppliers
- Keep idle cash in a safe position
Massive Action Plan for Business Success
To maintain financial stability, every business owner must:
- Monitor current assets daily.
- Keep track of inventory and cash flow.
- Regularly meet top customers.
- Secure idle cash in a safe place.
- Maintain strong supplier relationships.
By following these steps, business owners can ensure financial health and long-term success. A strong business dashboard is the key to making informed decisions and scaling a business effectively
