KPI Dashboards – The New Frontier in Financial Reporting

by John Higgins | Aug 01, 2017   ()

The Changing World of Information

Just think how much things have changed over the past 10 years in the way we communicate with one another and share information. Everything is instant (think text messaging), everything is more visual (think Snapchat) and everything is more mobile (think smartphones and tablets). It all started with social interactions but has rapidly extended to business information sharing. So we, as a profession, have to ask ourselves, “Are we adapting our reporting model to keep pace?” The answer, I believe, is sort of.

The good news is that there is an abundance of a whole new generation of tools available to CPAs to develop reporting systems that are timelier, more relevant and more easily understood than ever before. The bad news is that only a fraction of CPAs have taken steps to embrace this new reporting model and the opportunity it provides for us to do a better job of informing our clients, business owners, the management team, etc. I hope this article will provide you with some insight and motivation to begin to embrace this model.

History of Financial Reporting

In order to understand where we are at this point in time with our reporting model, let us take a quick tour of the history of financial reporting over the past 30 years. When I first entered the accounting profession in the early 80s, everything was still mainly paper-based with pegboards, general ledger binders and typewritten financial statements. This seems so archaic by today’s standards.

Things began to change with the introduction of the personal computer. Financial reporting became much more automated with PC-based accounting software and spreadsheet tools. That was a big step, and often a painful step, as we started with very primitive software solutions and finally reached a point of maturity with an array of quality accounting systems and Excel as our power tools.

The fact is, however, that even though we have improved how we go about providing financial reports, we really have not changed what we are reporting to any significant degree. Most financial reporting today is still based in the traditional P&L and balance sheet reports that are historical by their very nature. We have also made incremental improvements in cash flow projections, budgets and graphical reporting. All in all, the changes over the last couple of decades have resulted in a much better model for the way we provide our financial reports.

KPI Dashboards – The New Financial Reporting Paradigm

Now the real fun starts! We are entering a new era with a new financial reporting paradigm that significantly changes what we are reporting. The new trend is to provide our constituents with meaningful financial management information in the form of digital dashboards. So what the heck does that mean? What is happening in the financial reporting market now is a relatively fast-moving trend to provide key financial performance indicators (KPIs) in real time and in a simple format.

Think about any of your users of financial information: clients, management, business owners, stakeholders, etc. What is it they are most inquisitive about when it comes to financial information? Usually they want to know things about cash flow, revenue performance, gross profit, inventory turns, profitability, etc. – all generally performance-based information. Oftentimes, we have to take the historical financial statements and provide further analysis for our users in order to give them the information they are looking for. This is a significant aspect of the CPA’s value proposition.

The opportunity in front of us is awesome. With new technology available in financial reporting, primarily as a result of cloud-based computing, we can automate the KPI analysis process to the point where it is provided to our constituents in real time and in a format that is easily understood and very graphical.

The cloud has been the primary catalyst in the increased deployment of digital KPI dashboards, and for two reasons:

  1. The very nature of cloud computing means that we can have information delivered instantly to virtually any device.
  2. Now that the cloud infrastructure has emerged, we are seeing a whole new generation of software development that embraces all of the benefits of the cloud.

Just the simple fact that software can be developed to run through an internet browser and nothing else is huge. We take it for granted now, but think about the early days of spreadsheet software. If you generated a spreadsheet full of ratio analysis and wanted to share it with your clients, you had to print it to paper and send it. You could not assume they had a spreadsheet program to view it in. That, of course, is not an issue today. But my point is that today virtually everyone has a PC, laptop, tablet and/or smartphone with a browser and internet connectivity. So we can deliver KPI dashboards to them anytime, anywhere, on any device.

Your Role

So you are likely thinking, “This is all interesting and conceptual, but how do I embrace it?”

The good news is you already have obtained 90 percent of what you need – your knowledge and experience as a CPA and a provider of financial information. The remaining 10 percent involves learning more about the tools available today to help you build KPI dashboards, and, more importantly, to find out from the users of your services what KPI information is of most interest to them.

Let’s start with the latter. When it comes to the most relevant KPIs, it is pretty fundamental: cash, A/R aging, A/P aging, prior period and prior year comparisons, budget vs. actual variances, revenue trends, profitability trends, etc. The list goes on and on.

The beauty of the situation is that you can use this opportunity to serve your constituents as a valued business advisor by helping them to understand what KPI information should be important to them and help them analyze the financial performance of their organization on an ongoing basis.

I was recently talking with the managing partner of a CPA firm that specializes in virtual CFO services. Their business model is focused on weekly, one-hour meetings via the web with Skype. For that hour, they are simply reviewing the KPI dashboard with the client and making decisions based on the information. This is done in a value pricing fee model where they establish a monthly fee based on the value to the client. The back office side of it is all completely automated, so the actual effort required by the CPA is studying the KPIs and conducting the conference call with the client.

By the way, he has never seen many of his clients in person, only via the web – even the local ones. Clients these days don’t want to take the extra time out of their day for an in-perrson meeting. That is the beauty of all of the tools that cloud computing brings to us.

My recommendation? Do a little research on cloud-based accounting systems like QuickBooks Online, Xero, Intacct and NetSuite. These are all top-selling solutions that fully embrace the KPI dashboard model. Having this functionality built in makes it about as simple as it gets. In fact, the risk we face as a profession is that software developers are providing this information without our involvement. So CPAs need to step it up and take an active role, because at the end of the day, no matter how simple or graphical the information is, the clients need our assistance to help them understand what the information truly means in terms of business performance.

One of the most basic tools you can use for KPI dashboards is Excel. With the charting capabilities of Excel and the new Excel Business Intelligence add-in from Microsoft, you can create Excel-based dashboards that can be delivered through the web in real time. This approach will require more effort to get them set up, but it is a tool that is ubiquitous. There are also dedicated cloud-based KPI dashboard applications that can be used independent of your accounting system.

With an understanding of the KPI dashboard concept, I hope you’ll see the opportunity it provides for you to add more value. I believe the more you learn about this new paradigm, the more excited you will become about embracing it because it creates a rare opportunity for us to be more creative as a profession.

“The new trend is to provide our constituents with meaningful financial management information in the form of digital dashboards.”

John Higgins, CPA Crossings

 Learn how at MICPA’s upcoming webinars on KPI dashboards.

About the Author

John H. Higgins, CPA.CITP is a strategic technology advisor and co-founder of CPA Crossings, LLC. Our mission is to simplify technology to help CPAs succeed. To learn more visit


Source: CPA Crossings
Source: CPA Crossings

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