*This is Part 2 of our four-part series. If you missed Part 1, click here.

Consider our Accounts Receivable illustration. You have an Aged AR report—sort of like knowing how many ounces of gas are in your tank. In addition, you probably have an overdue report—similar to your gas gauge. However, hundreds or thousands of individual invoices make up your receivables total; and, each one is approaching an early pay discount date or a due date (or more frustrating, long past a due date). That is the first sign that you may have a problem. Perhaps the customer’s average days to pay is 10, to take advantage of your early pay discount. What would the impact be if your business system notified your collections or sales staff when an invoice went past the customer’s average days to pay threshold? This might be a 20-day jump on a potential problem. Perhaps there is a problem with that invoice. Do you want someone to act to determine if there is an issue? Probably not, if it is a small invoice, but you may want someone to take action if it is a larger invoice. Consider this as an example of a production type alert or dashboard.

Taking that a step further, how about an AR Management Dashboard? You know what numbers the bank or your CEO wants for total dollars and aged AR. If your accounting manager, controller or CFO has a dashboard that displays just those numbers, he or she will quickly spot positive or negative trends without running and analyzing several reports. Generally, what happens is that you need more information and by the time you know it, the baseline has changed, and you have to rerun all the reports, so they have the same starting point. With a Dashboard, all it takes is a quick glance – or an email when something exceeds a threshold—and action can start.

Okay, what about top management? Here is where we need the flashing light. These AR numbers probably should not be on the CEO’s dashboard (there are too many other areas of concern). However, if a problem starts appearing, it might be appropriate to have an advance warning before a small grass fire turns into a raging forest fire.

So, why a Dashboard? Because, it is the one place to get an instant view of your business health, just as your car’s dashboard provides you an up-to-date view of your car’s status. It isn’t the only source of information, but it provides you status updates on the critical components your ERP or CRM system can measure. Can it tell you if your engineering department is having a problem with a new product design? Theoretically, yes. Practically, probably not. Will it tell you the maintenance status of the forklift in your warehouse? It could, but first, let’s focus on the things that are immediately measurable within your ERP or CRM system.

Read parts one, three and four of this series.

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To learn more: Business Intelligence, Reporting, & Dashboards Are NOT the Same Thing