This is a good example of how benchmark data can provide insights, but not necessarily all of the answers, and why further analysis is required. A firm interested in improving their customer service practices may compare its own processes and metrics against those of its most successful competitor. If it identifies negative discrepancies or differences in measures, it may start improving its processes to strengthen its performance.
The company’s per FTE average cost for its F&A function was $78,000, compared to $54,000 for the Median performer. This higher cost was surprising given some of the low-cost markets in which the company operated. The overall opportunity to reduce its cost was significant, approximately $1,000,000 annually, based on the difference between their current level and the Median benchmark. Working correct spelling for calendarize the math, we would need to identify opportunities to reduce about 13 FTE’s to achieve the $1M annual cost savings, or 20% of the total staff. The case for benchmarking suggests that a particular process in your firm can be strengthened. Some organizations benchmark as a means to improve discrete areas of their business and monitor competitors’ shifting strategies and approaches.
This means that—as an example—a company making $1 billion in revenue per annum could be spending $8.5 million on the finance functions alone. The past few years have seen substantial industry-wide movement toward digitalization in accounting. Accounting personnel are experiencing higher workloads than ever before, resulting in digital transformation initiatives to help offload low-level administrative tasks and increase throughput.
Avoid common pitfalls and mistakes when interpreting and evaluating benchmarking results. Take control by understanding the nuances, avoiding oversimplification, considering industry differences, and being cautious of misleading data or biased comparisons. Another key strategy for successful implementation is ensuring data accuracy and consistency. It’s important to gather reliable data from reputable sources and ensure that it’s consistently updated over time. Additionally, selecting appropriate benchmarks that accurately reflect your industry’s standards will provide you with more meaningful insights. Once the changes have been implemented, it’s crucial to track your performance regularly.
- He is a best-selling author of over 20 books, writes a regular column for Forbes and advises and coaches many of the world’s best-known organisations.
- Years ago, I met with a company to discuss its marketing practices and learned it had worked with a group to benchmark its spending on marketing to its competitors.
- In this blog, I will provide more insights into which benchmarks are good indicators of opportunity, and how to “read between the lines” to understand what may be impacting the current performance.
- Regardless of the motivation, cultivating an external view of your industry and competitors is a valuable part of effective management practices in a world that is constantly changing.
These pillars are an aggregate of the 12 areas of firm competency that influence your firm’s overall proficiency. Excelling in each of these 12 areas—and the 4 overarching pillars—is how you will achieve a higher level of practice excellence. We have learned that the biggest issues facing firm owners around the world have nothing to do with technical knowledge. Instead, there exists a sizeable gap in the skills required to be a successful business owner and entrepreneur.
As you can see from this example, the use of benchmarking data analysis can provide real insights into the opportunities that are available for cost and productivity improvements within an organization. To provide the client with further opportunities for cost savings, we analyzed the opportunity to utilize outsourcing for the transactional roles being centralized. For General Accounting, the company was performing at almost 50% above the Median performer, but there are still opportunities to drive additional performance improvements in this function as well. Typically you can gain at least 20-30% efficiencies (lower headcount) through centralization and automation initiatives.
Why Should You Benchmark Accounting?
People often ask me this, and there seems to be a general assumption that benchmarks and KPIs are the same thing. Bernard Marr is a world-renowned futurist, influencer and thought leader in the fields of business and technology, with a passion for using technology for the good of humanity. He is a best-selling author of over 20 books, writes a regular column for Forbes and advises and coaches many of the world’s best-known organisations. He has a combined following of 4 million people across his social media channels and newsletters and was ranked by LinkedIn as one of the top 5 business influencers in the world.
The company had F&A teams located at all of its manufacturing plants, focusing on localized financial operations, with specific (and unique) regulatory requirements for each country. The “rule of thumb” that can be applied to all organizations is that “Bottom Performer” is not where you want to reside, and “Median” is typically a more realistic goal if you are considering performance improvement https://intuit-payroll.org/ initiatives. Traditional “Effectiveness” metrics focus on the operating cost for the various functions, such as the Personnel Cost to perform the activities within a function, and the Total Cost to perform these activities. Personnel Cost is based on the fully loaded cost of the people within the team, doing the work, so there is a direct correlation to the Efficiency metrics listed above.
With nearly 30 years of experience working with big names on Wall Street to healthcare and insurance, Paul has unique insights into the areas of cloud, security, platform, and compliance systems. He advises clients to benefit from growing digitalization by conducting digital benchmarking and leveraging the cloud. His key specialization includes engineering issues, operational security, and compliance controls. Controlling these costs and understanding competitor expenditure will keep your business on the right track financially.
What are the key financial metrics that are commonly used for benchmarking in financial analysis?
Care should be taken to define benchmarking initiatives deliberately and scientifically, or the results could be misleading. As it is dependent on speedy and accurate service to maximize efficiency, cut costs, and increase profits, it will study the drive-thru practices of key competitors. Every second gained without sacrificing customer quality will allow the firm to increase its profits. Over the years, competitors have consistently innovated their drive-thru operations’ configuration, such as the number of windows, the menu, the speaker boards and ordering approaches in an attempt to improve their performances. To gather and analyze financial data for benchmarking, use various data gathering techniques such as surveys, interviews, and financial statements.
Key Steps to Master Your Retirement and Have a Secure Financial Future
At-a-glance visual reports help you see the big picture and give you actionable insights to help you grow your business. Data leads to insights, and insights lead to better decision-making across business areas. This is a crucial benefit touted in a 2020 report by the Association of Chartered Accountants (ACCA)—along with better risk management, real-time performance insights, and proactive and predictive capabilities[2]. Some of the locations were in high-cost markets (North America, Europe, Australia), and others were in low-cost markets (Latin America, Africa, Asia).
Accurate financials.Total peace of mind.
We’ll guide you through the process of gathering and analyzing financial data, allowing you to interpret and evaluate benchmarking results with ease. Armed with this knowledge, implementing changes and monitoring progress will become second nature. Each customer’s main point of contact is a dedicated in-house, professionally-trained bookkeeper, based in North America. Part of what makes Bench unique is that we blend together the human touch with modern technology.
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F. John Reh is a business management expert, with more than 30 years of experience in the field. A writer and journalist over the past 17+ years, he has covered business management for The Balance. David McGuire is a leading expert on cost segregation, fixed assets and depreciation law and a co-founder of McGuire Sponsel. If you’re several years behind on your bookkeeping and taxes, you can get caught up and filed with Bench Retro. If you’re switching from QuickBooks, we’ll work from your closing balances to do your bookkeeping going forward. If you’re not sure whether your closing balances are accurate, we recommend chatting with one of our Onboarding Specialists about Catch Up bookkeeping.