Performance Accounting
Performance accounting is proactive accounting in the sense that it focuses on the performance and improvement of the organization.
Performance accounting is strategic in nature because it focuses on improving the performance of your business. Performance accounting couples the financial outcomes of your business with real world business processes, systems and procedures to increase profits and reduce risk.
Performance accounting digs deep into your business to identify those activities which predict the greatest amount of impact with the smallest amount of change.
Performance Accounting:
- Emphasizes exceeding the expectations of both the internal and external customers in order to eliminate areas of waste and redo which cost organizations many multiples of the bottom line
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Looks to eliminate those inefficient activities that chew up significant amounts of money
- Focuses on team members inside the company and customers and suppliers
- Establishes a vision for the company which all of the employees support
- Identifies the vital functions of the company
- Documents the critical elements or strategic directions for each of the functions
- Develops the outcome measures or Key Performance Indicators for each critical success factor in order to measure the extent that a critical success is achieved
- Creates the activity input measures (AIM). These are the measures that will predict the accomplishment of the output measures.
Change is difficult, employees resist change, change is expensive. For all of these reasons, the extent of the change should be kept to a minimum and only those that generate significant impact should be implemented.
Performance Accounting gives the business owner the opportunity to prevent a problem before it becomes a problem. Just like the great coaches are able to make adjustments while the game is still in play – Performance Accounting gives the business owners the ability to make adjustments that will impact the bottom line.
Performance accounting provides the business owner a dashboard to monitor and measure the key areas of the business. The dashboard provides the business owner the ability to recognize where adjustments need to be made in order to impact the financial outcome.
Performance accounting generally involves a change in the culture of an organization. Leadership is a critical element so that all employees think strategically with respect to how their responsibilities effect the achievement of the overall goals of the company.
Companies today must be able to provide greater value at a lower price; companies must be able to acquire, train, and retain key employees; Companies today must be able to continue to improve their performance in all areas to be quicker, faster, better. Performance Accounting contributes to the achievement of all of the goals of an organization.
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