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Business Performance Measurement

By Boris Nenide

Business Performance Measurement is concerned with measuring performance relative to some benchmark, be it a competitor’s performance or a preset target. A typical performance measurement helps businesses in periodically setting goals and then providing feedback to managers on progress towards these goals. The time span for these goals is normally a year or less for short-term goals and may extend up to several years for long-term goals. Hence, specifically, business performance measurements are formal, information-based routines and procedures managers use to maintain or alter procedures and practices in organizational activities.

The primary reasons that may be attributed to this exercise of Business Performance Measurement are to synergize profit and growth, and, consequently, decide upon extents of control to be exercised for favorable and justified outcomes. This will also enable you in measuring and redefining your short-term and long-term goals by offsetting them against opportunities and capabilities as you move along. These strategic goals and plans then peter down to operations, human resources and other day-to-day management practices. As an ongoing exercise, it will ensure monitoring and control to drive growth and improvement.

Obviously, to achieve this, a business has to spell out the parameters and subsequently, the scores or ratings to gauge performance vis-à-vis these parameters. The outcomes of such collated data will be very strong indicators of the business health of your enterprise. And this, will, no doubt, reflect on the performance of the top management which mainly drives such business activities. As an entrepreneur, you can then have a holistic view of your business. Such data-based information will empower you with indices with which you can fast-forward your business towards betterment and growth. But do make sure the data are honest and dependable. Check out the IT support practices and tools which collate this data and generate reports as it can make or break your strategic decisions. And always remember that efficiency and effectiveness are central to your business performance measurement, the challenge being to strike the right balance between them.

You can now review performance at all levels, identify improvement areas, set new benchmarks for improvement and then again review the impact of these actions. And, not to forget, reward excellent performance to sustain motivation which always runs the risk of falling by the wayside if ignored. This is what shouldering responsibility is all about, after all.

As an entrepreneur, you must be aware that these parameters of business are being continually researched upon and these indicators have evolved over the years to suit the needs of the present times and different natures of businesses and industries. And even within a business entity, there are various indicators for different aspects of business, including the financial perspective, the manufacturing/operations perspective, the customer perspective, etc. For small enterprises, the financial perspective by itself is crucial. A balanced business scorecard will help you to study and gauge the financial framework of your organization.

FINTEL can be helpful in the process of gauging and managing business performance by providing tools and data designed just for that purpose, including reliable and insightful industry comparisons and trends.

The iconic Brazilian soccer player of the 1960s and 1970s, Edson Pele, was once caught smoking by his father when he was a child. His father advised, “ Listen, if you want to play sport, you have to be in good health”.

This applies to your businesses’ health too. Check out what you need to smoke out! Go, get the barometer.

Boris Nenide has been with the company since its founding and currently serves as its Chief Operating Officer. FINTEL is a leading provider of data services and business intelligence solutions that help our clients to make better decisions based on the largest and most reliable financial benchmarking database of privately held companies. We support your decision making processes with timely, relevant, easy to retrieve and readily presentable
financial information and benchmarks. We have a passion for supplying dependable business intelligence and expert advice that make our customers more successful.

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Working Capital Management – a critical aspect of business operations

By Boris Nenide

Quite often, we see that new dreams and new businesses do not sustain beyond the take-off stage due to a small error in management. For instance, a miscalculation of the operating expenses that in business parlance is called ‘Working Capital’ can be catastrophic.
In some cases, an entrepreneur might have done a reasonably good assessment of the operational expenses but may have simply failed to incorporate the debt payment as a key component of working capital. Or maybe, a crisis situation was not provided for by way of contingency funds. One false step, and it triggers a chain of events that lead to a situation like a boulder hurtling down a hill wherein one has no choice but to wait for the boulder to damage everything on its way down and then come to a standstill. And, of course, it is too late by then.

The short-term decisions of a company can be grouped under the heading ‘Working Capital Management’. This deals with the short-term balance of current assets and current liabilities, the focus being on management of cash, inventories, and short-term borrowing and lending.

By definition, Working Capital is simply the excess of current assets over the current liabilities. Short-term assets denote the cash and all such assets that can be converted to cash within a year like marketable securities, accounts receivables, short-term notes receivables, inventory and pre-paid expenses. The short-term liabilities comprise cash expenses within a year like accounts payable, short-term debts such as credit lines, short-term components of long-term debts, accrued expenses.

All small and mid-sized companies consider Working Capital management as the most important management activity because of the significant financial impact it has on the overall organization’s health, not just the financial health. The availability of liquid cash or the ability to generate liquid cash at short-notice through current assets can go a long way in sustaining smooth operations of your business. It is critical to business, and hence, the optimal utilization and constant effort at improvement of Working Capital management are of utmost importance. Else, it hits at the very core of such businesses.

So, what should be considered as adequate Working Capital for a company in a specific industry and, of a specific size? What are the key components of working capital? How should the working Capital for your specific business be financed? What are the various methods required to manage the working capital? For example, excess of cash is also a sign of operating inefficiency. Perhaps, this surplus cash could be better utilized towards growth. An analysis of the cash conversion cycle is a good indicator of this. And yes, one cannot forget to consider external factors like legal requirements, business environment, and internal factors like the organizational structure and internal information communication system, that can impact working capital management.

What has been discussed here is just a basic introduction to the topic. A real-life scenario will have many more complex components and aspects to it. FINTEL is a leading provider of industry data and financial management tools, including it proprietary concept of Net Balance Position developed by the company’s co-founder, Dr. Robert W. Pricer. Empirical testing has shown that this is by far a more effective tool than the traditional liquidity ratios to map a company’s liquidity situation.

Just like an agile sportsperson has to sustain his competitive edge with regular exercises, the wheels of business can keep churning only if they are well greased all the time with excellent Working Capital management.

Here’s wishing you Happy Working of your Capital!

Boris Nenide has been with the company since its founding and currently serves as its Chief Operating Officer. FINTEL is a leading provider of data services and business intelligence solutions that help our clients to make better decisions based on the largest and most reliable financial benchmarking database of privately held companies. We support your decision making processes with timely, relevant, easy to retrieve and readily presentable
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Industry Leaders Seeks To Increase Profits with Business Financial Intelligence

By Boris Nenide

One of the key challenges any business faces in times of turbulence is how to sustain and enhance profitability. Profit is, no matter how one puts it, the very motive of all commercial endeavors and the management is answerable to the stakeholders for the profitability performance.

Profit, simply put, is the gap that exists between a firm’s revenues and its expenditure. So, as long as the company is able to increase its revenues at a certain rate and its expenditure increase at an equal or lesser rate, the company’s profits are likely to improve – this is a layman view of things. Revenues are, in turn, dependent on volume and price.

Now, in a recessionary economy, there is a sure slump or stagnation expected in demand for almost all types of goods and services, so the volume is unlikely to go up. The prices can only go down in midst of low demand and competition so both the multipliers on which revenues depend are likely to shrink i.e. most companies are bracing for a deceleration, if not, decline in revenues.

However, this is where the management has to show its knowledge and skills to the stakeholders – ok, we know that there is a crisis situation but that is what we were hired for….if it were all smooth and easy, why would professional management ever be required…

This is where cost-cutting, production efficiency and smarter financial management can help. Increasingly, business analysis and financial benchmarking tools such as FINTEL’s Business Scorecard and Industry Metrics are being used by industry leaders seeking to sustain and enhance profitability. By highlighting areas of operational and financial inefficiencies, and presenting industry benchmarking and best practices data, these financial intelligence tools provided by FINTEL are helping managers to control costs and thus, maintain or even enhance the gap between revenues and expenditures.

The power of better financial management can just not be overemphasized. It is one of the few ways in which a company can not only survive the present slowdown, but enhance its margins and become a leaner, efficient organization with least wastage, a competitive advantage that cannot be easily lost to competition.

FINTEL is a leading provider of data services and business intelligence solutions that help our clients to make better decisions based on the largest and most reliable financial benchmarking database of privately held companies. We support your decision making processes with timely, relevant, easy to retrieve and readily presentable financial information and benchmarks. We have a passion for supplying dependable business intelligence and expert advice that make our customers more successful. Boris Nenide has been with the company since its founding and currently serves as its Chief Operating Officer

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Financial Intelligence: What the Numbers Really Mean

By Boris Nenide

How financial intelligence is helpful to enhance the company’s financial performance.

Quite typically, the term ‘financial intelligence’ is linked to a very niche government activity of gathering of information about the financial affairs of entities, the exercise aimed to curb money laundering, financial fraud and such evils as terrorism.

However, a more relevant and business related meaning of financial intelligence is ‘understanding the financial aspects of business and applying the knowledge of financial management to improve the operations and profitability of the company’. Top consultants have often argued that better financial management, more than anything else, is the key to improving a company’s competitiveness in the market. They claim that employees, stakeholders and business affiliates should understand the financial implications of their everyday decisions and actions, and work for the best financial outcome for the organization.

In fact, business intelligence tools of today, including industry benchmarking, that aim to place the organization’s performance side by side with that of competition and industry peers, place strong emphasis on financial performance. Saying that a competitor has a better network, enjoys greater channel support or better credit terms from raw material suppliers or has higher per employee productivity doesn’t suffice anymore – financial metrics give dimensions to such observations. When an organization invests in business financial intelligence, it shows its commitment to not just knowing its performance vis-à-vis that of its peers or competitors but to its determined endeavor to improve its cost competitiveness, its revenues and thereby, its profitability. Top management and the Board manage by exceptions – they cannot go over to everyone on the shop floor to ask what is wrong and then try to correct it. However, business financial intelligence provides concrete, actionable insights into what a business is doing right and where it is going wrong. When usage of obsolete machinery is seen together with lower productivity in dollar terms, the decision makers can immediately smell the rat and consider modernization of the plant.

The decision to modernize or continue the same way is again based on its financial impact – if the expected benefit (increased productivity) seems to surpass the cost of modernizing, the decision makers may be keen to go in for it. Industry best practices are discovered when financial performance of the organization is placed with that of peers and competitors in the backdrop. Enterprise business intelligence has acquired a financial flavor – very objective, actionable information is needed to succeed and be profitable today.

No business can survive in today’s rough, cut-throat markets with ‘flab’- customers expect enhanced value at lower cost, and surprisingly, one finds that competition is often willing and able to extend such offers. Financial intelligence is a discipline that cannot be ignored if the business has to be one up on its competition.

FINTEL is a leading provider of data services and business intelligence solutions that help our clients to make better decisions based on the largest and most reliable financial benchmarking database of privately held companies. We support your decision making processes with timely, relevant, easy to retrieve and readily presentable financial information and benchmarks. We have a passion for supplying dependable business intelligence and expert advice that make our customers more successful. Boris Nenide has been with the company since its founding and currently serves as its Chief Operating Officer.

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Business Benchmarking – Is It Really Effective?

By Boris Nenide

In today’s competitive business world, it is necessary to spend more time working on your business rather than in the business. You always compare your business with your competitor, but have you ever tried to know whether you are charging enough for your products or services? Whether you are spending too much? Who’s the top performer among your industry peers and competitors? And how do you measure this? etc. Although most business owners do not pay much attention to these aspects, these considerations are considered to be among the pillars of a successful business. Benchmarking is a business management tool that is used strategically to review the position of the measuring organization within the market place.

Introduction to Business Benchmarking

The process of identifying who is the BEST, who sets the standards and what the standard is, is called Business Benchmarking. It other words, it is a process of determining ‘best practice’ related to both products and the manufacturing and delivery processes of these products. The search takes place in all the industry.

Process of Benchmarking

The process of Benchmarking involves the examination of performance levels of other industry or organization. In this way benchmarking helps explain the processes behind excellent performance. Business benchmarking facilitates improved performance in critical functions within an organization.

The four major key steps for applying benchmarking are as follows-

• Understanding your own existing business process in detail

• Analyzing the business process of your competitor

• Comparing your process with that of others.

• Implementing necessary steps to close the performance gap

Major Benefits of Benchmarking

Benchmarking is very effective for all the small and large businesses. It helps the organization enhance its performance level.

Major benefits of this process include the following Benchmarking -

• Allows an organization to compare itself against the competition, the market,

• Is a powerful motivator for change and can facilitate developing a roadmap from current state to best practice.

• Can improve the day to day management of the business

• Offers valuable insights

• Helps to identify the areas of underperformance compared to other organizations, their reasons and needed actions.

FINTEL is a company that brings you an array of product to help you understand and improve the financial performance of any organization by using business benchmarking tool. If you are searching for some source to enhance your financial performance, you can take the help of FINTEL’s Business Scorecard.

FINTEL is a leading provider of data services and business intelligence solutions that help our clients to make better decisions based on the largest and most reliable financial benchmarking database of privately held companies. We support your decision making processes with timely, relevant, easy to retrieve and readily presentable financial information and benchmarks. We have a passion for supplying dependable business intelligence and expert advice that make our customers more successful. Boris Nenide has been with the company since its founding and currently serves as its Chief Operating Officer

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