Knowing the overall health of your business does not end once you have already produced and interpreted the different financial statements. After all, every enterprise is multi-faceted, and money is not the only thing that makes it thrive—or die. However, determining business position is just as hard as looking for a needle in a haystack when you don’t know what to measure in the first place.
To help you in effectively managing your business, use a balance scorecard.
The Balanced Scorecard Approach
The balance scorecard was conceptualized by D. P. Norton and R.S. Kaplan. They have learned that a good financial position does not give the most accurate picture of a business. There are more factors that have to be analyzed. For more details see more
The scorecard therefore measures other components like customers, business processes, growth or learning, along with finance. Once you’re able to evaluate each of these, you can then a more “balanced” perception of your enterprise.
This technique carries with it many advantages. For one, it provides the most comprehensive image about the business. Second it’s much easier to relate cause and effect. For example, if the sales have been going down for the past few months, assessing the other elements may help you realize the lack of proper monitoring of accounts receivables, which is under business processes. It may also have been caused by a drop in customers.
Managers and business owners can make more effective critical decisions, and they’re more assured such decision will benefit every element of the scorecard. The previous assessments can also be archived and used for future comparison, which will then help companies determine their growth or lack of it. Sometimes businesses veer away from their main objectives and goals. The scorecard can help steer them back in the right direction. The scorecard, moreover, combines qualitative and quantitative analyses, making it easier for every person concerned, from the stakeholders even down to the employees, to understand the current business position.
Balanced Scorecard Software
The approach can be emulated by any business entity, and it can also be extremely simple. It gets complicated, however, once the company gains years and starts to grow. That’s when all these 4 elements become more pronounced.
To evaluate the key factors in an unbiased fashion is difficult. Thus, businesses might want to invest in balanced scorecard software. Many of them come with templates that suit your needs. They also contain guidelines on how analyze each of the 4 business facets.
The program doesn’t just archive old reports and analyses, but it also allows you to filter certain information. For example, you don’t have to look at all the reports to find out the operational scorecard for the first 3 months of the year. You can use the advanced search or filter instead.
It can be very comprehensive, covering strategy maps, initiatives, risk management, and performance reports. The inclusion of symbols, icons, and graphs allows to understand the figures easily. Many software options include balanced scorecard examples for beginners. They are excellent when getting a full understanding about the process and how they can be of help to the business.