Reasons to measure business performance


Monitoring business performance is crucial for all companies to prevent any issues or problems occurring in the future. During prosperous periods, it may be easy to let business performance measurement fall, but as soon as there are any changes in the market or an unexpected event occurs, problems can soon arise. Business performance management will help to set specific goals for the company, make it possible to achieve those targets, and create a strategy to improve future performance.

Why do you need to measure business performance?

Monitoring business performance will drive improvement in the company, creating an efficient process. Management accountants will put processes in place that will reduce waste, improve productivity and lower the cost of production, increasing the overall profit. By comparing various areas of the business, the manager can spot areas which need improvement as a priority. Through introducing best practices, a company can streamline a process and reduce wastage. Once an effective measurement system is in place, risks are lowered, as areas of weakness can easily be identified and controlled.

How to measure business performance

By conducting a regular check of the company, you will be able to spot any risks or potential problems. One of the areas where you can easily have problems is the cash flow. As it can take weeks or months for clients to settle invoices, you have long periods of time where you could have financial problems, so put a series of incentives in place to encourage prompt payment. You could offer an early settlement discount, or introduce penalties for late payment.

The workforce is another area that may be overlooked. As the employees of a company are its most valuable asset, an employer needs to take care of key staff. Overheads are another area where close attention is required. Assessing overheads should be routine for most companies, to review costs and make sure that the business is functioning at capacity.

As a business owner or manager, change can happen overnight, which means that you are always looking for both risks and opportunities. In addition to remaining flexible so that you can cope with any changes, you should also maximise opportunities when they arise.

Business performance measurement is a regular activity for a company owner or manager, maximising the company performance while lowering costs. If each department of the company achieves its full potential, the company will be a success. If you would like to discuss measurement of business performance further, please contact us.