There are a number of services your accountant can offer you that you may never have thought about or even realized that they could provide. Benchmarking is one of those types of services, but when you think about it why wouldn’t your accountant offer this service, after all understanding and interpreting numbers is what us accountants do best.
What is benchmarking?
Benchmarking is simply comparing your businesses performance against other businesses in your industry to identify areas where you can improve.
Benefits of benchmarking
- Helps you to deliver a competitive advantage and outperform your competitors
- Provides direction for process improvements
- Identifies weak areas within your business and indicates what needs to be done to improve
- Helps you to understand your strengths and how you could use the to gain a competitive advantage
- Allows you to understand how the leading businesses in your industry manage their business to achieve a competitive advantage
- Provides you with realistic and achievable targets
- Encourages continuous improvement
- Obtains data to support decision-making
- Helps identify best practices and identify what performance level is actually possible
- It’s a cost effective and time efficient way to establish a pool of innovative ideas
- Helps reduce and eliminate waste
Key areas your benchmark should cover
- Focus on your key business drivers. These are the processes that underpin the success of your firm, and will vary from sector to sector and business to business. If you provide a service, customer care is likely to be a key business driver; if you are a high-volume manufacturer, production-line speed will be a key business driver.
- Decide who to benchmark against. Your local Business Link or trade association should be able to suggest benchmarking partners. Pick firms of a similar size and with similar objectives to help work out industry yardsticks; but also compare with firms outside your sector who excel in areas you want to measure – importing their approach could help you leapfrog competitors.
- Compare strategic objectives. Can you learn strategic lessons from benchmarking partners? Does a focus on quality standards give them an edge, for instance? Are they developing online sales channels? Think what other firms’ strategic objectives would bring to your business, if anything.
- Assess the efficiency of your processes. Look at the mechanics of your business – the production techniques, quality controls, stock management and so on. How effective are they? How well are you using your technology? Are other businesses benefiting from new ways of doing things?
- Analyse your allocation of resources. Are you putting resources into the same areas as your benchmarking partners? Do they have more employees, or fewer? In which parts of the business? Have they invested more in IT and other equipment? Are they spending more on marketing?
- Weigh your costs against industry norms. These might include utility bills, wages or research and development costs. If you can highlight areas where your costs are higher than the average, you may be able to make savings.
- Calculate sales per employee. This will provide a straightforward measure of productivity and efficiency. If your sales are comparatively low, investigate the reasons; you might find the problem is not with your sales staff but your product, or that you are pitching to the wrong market.
- Work out your profit margins. Your gross profit margin (direct profit on the cost of goods and services sold) will tell you how efficient your production processes are. Comparing this with your net profit margin (profit after all your costs have been taken off, including marketing and administration) will tell you how effectively you earn profits from sales. But how do you compare with other businesses? Should you streamline your operation?
If you would like to find out more about benchmarking your business performance check out our benchmarking service http://omnisgroup.com.au/business-advisory-services/benchmarking/ or call us on 9380 3555.