Why is Benchmarking Important in Business?
“Did you ever imagine that you could get confidential, real time, comparison of my business with other businesses in your industry sector, so easily. You can’t see individual business data but you can now directly compare your business to your peers as a group”
Benchmarking is a systematic process for comparing business performance or processes in different organisations, or between groups of organisations, to learn whether, and how, things may be done better.
The purpose of benchmarking is to improve performance or services by identifying where changes can be made in either what is done or how things are done. The best businesses have long been making comparisons between themselves and others without necessarily labelling the exercise as benchmarking. However, true benchmarking is more than just ranking yourself against others or creating league table.
Benchmarking differs from other improvement techniques because it:
- focuses on excellence;
- involves detailed comparisons;
- pools shared information to benefit all the contributors; and
- encourages front line managers and staff in seeking out and implementing change.
Key Benefits of Benchmarking for your business.
“As an advisor I can now see the impact of the help I give my clients on a month to month basis. Imagine how much more effective that makes me as an advisor!”
Financial benchmarking can provide businesses with the evidence they need to identify significant differences in resource management, which may suggest there is scope to do things better, to improve efficiency, reduce costs or identify potential savings.
How does it work in practice?
Typically, businesses will contribute their information about their own financial performance to an independent confidential organisation so comparison can be made to grouped data from similar businesses. There is, however, sometimes merit in a business comparing itself with a different type of organisation that may be facing similar challenges. For example, a service business that struggles to grow sales may learn some useful tips by comparing its approaches with say, service businesses of a different scale.
The benchmarking service enables businesses to request charts that compare their income and expenditure profile with that of similar businesses. The service includes information for all maintained businesses in Australia through individual businesses regularly uploading their own business data. Typically this is at the end of each month and provides close to real time comparison for your business. Any business can subscribe to use this service. Reporting is available for Key Performance Indicators (KPI) like profitability, return on investment, liquidity, capital structure, productivity and activity. Reporting is also available for the standard profitability performance. High level comparison is available within your industry sector and your rank within a specific peer group like an industry association, without disclosing your actual data or rank position to that association or to other members of the group. This comparison is between your business and the aggregated data only where there are more than five businesses in the group.
Find out about joining the hundreds of other businesses that subscribe to the benchmarking service
So how can I use benchmarking in the current economy?
An example is a business that suffers a significant decline in sales due to economic factors. They can compare themselves to others in the industry to identify if this is industry wide or actually their individual business. No, this doesn’t solve the problem, but it helps to identify the potential causes. Then the business can monitor it’s performance compared to its peers and work out what actions are more or less effective than its peers during the recovery phase.
Data and Access Protection
You cannot see anyone else’s data and no one can see yours. You can only compare your results to the overall results of your industry sector or group. Data is uploaded to an independent third party secure server and access is only available to staff with adequate security clearance and then only for the generation of reports. Once you upload your data we will be able to generate reports for you that compare your performance to the grouped data from similar businesses in your peer group or industry sector.
By Virtual Advisor
Find out about joining the hundreds of other businesses that subscribe to the benchmarking service here…
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