Financial benchmarking - What is financial benchmarking?
Financial benchmarking involves running a financial analysis and making a comparison of the results in order to assess a company's overall competitiveness, efficiency and productivity
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The term ‘benchmarking’ refers to the process of comparing the business practices and performance standards of your company to that of other firms within the same industry. Quality, time, and cost are the most common values that are measured.
It's essentially using the best practices of other businesses in the same industry as a 'benchmark' to improve the practices of your own company.
Improvements that are made from learning through the results of benchmarking can help a business to run more efficiently and become much more cost effective.
How benchmarking works
Benchmarking usually used in order to evaluate the performance of a business by focusing on one or more particular indicators. These indicators could be cost per unit, productivity, defects per unit, or otherwise. The measurement of performance is then compared to that of other firms within the same industry.
Benchmarking is a process that is often implemented by strategic management. Organisations evaluate the various aspects of their processes and compare them to the processes of “best practice” companies. Most often these “best practice” companies are from within the same field or industry.
Why benchmarking is beneficial
The information gained from such a comparison allows firms to determine how well they perform in comparison with the “best” and, in turn, develop new and better strategies to work towards making improvements or adopting certain best practices.
Benchmarking is usually an ongoing process in which companies continuously seek the improvement of their practices.
The twelve stages of benchmarking
Robert Camp (author of one of the first books on benchmarking) developed a twelve-stage approach to benchmarking, as follows:
1. Select subject ahead
2. Define the process
3. Identify potential partners
4. Identify data sources
5. Collect data and select partners
6. Determine the gap 7. Establish process differences
8. Target future performance
10. Adjust goal
Financial benchmarking and Debitoor
Because Debitoor allows you to maintain a thorough, ongoing overview of your income, expenses, and payments, you are always in a position to examine your current financial practices and compare them to others within your industry.