Financing with Scorecards
The financial condition of any firm is the mirror to its performance and overall health in the corporate industry. This is a quantified division of a business entity dealing with the accounts, expenses, revenue, hedging and forecasting trends, crisis, opportunities and threats that are prevailing in a particular industry, the national and international markets and the world economy as a whole. The finance department is deeply engrossed in the gauging activity of the various tasks and factors within and outside the organization for the purpose of gauging and maintaining records.
This helps an organization build a strong defensive strategy against the financial downturns. One of the ways to tackle the issue related to gauging and managing the vigorous research involved is taking help from technology. This allows better management of time and provides the management with spare time to work on other issues. One such technological support comes from the Balanced Scorecards. It allows taking into consideration a variety of factors to effectively deal with the situations in the current or future. It provides a framework that helps getting a holistic view of the business.
The KPIs or the Key Performance Indicators are grouped as; Financial, Business Development, Operational and Workforce management to ease the research related to financial crunches. The financial management consists of KPIs which depict the percentage increase in credit days, percentage decrease in debtor days, liquidity ratio, accuracy of financial risk forecasts and consistency of cash flows. The business development perspective takes into account KPIs like; number of new long-term contracts initiated, client oriented products, services introduced, lead generation effectiveness and response level. The operational perspective provides an insight of the tasks and activities related to business. It comprises of KPIs like; percentage reduction in decision-making and lead time, percentage decrease in cycle time to resolve adjustments, simplification of lending conditions and identification of negative patterns.in order to understand the measures to effectively manage the workforce it is important to identify and study; decrease in staff turnover rate, training uptake, percentage decrease in sickness or absence Level, crisis communication and continuity of information and feedback. The Balanced Scorecards allow an organized methodology to the analysts through a detailed review of activities based on tasks divided, liquidity, asset turnover, financial leverage, and profitability. It enables to use financial ratios like, Quick Ratio, Current Ratio and cash ratios to be used promptly and with ease for determining data.
Balanced Scorecards is a comprehensive information system that allows comparison of ratios across various companies or reporting terms simplifying the process of analyzing these statements. It can be easily incorporated into the already running and installed management information system of a business firm and allows identifying the weaker and stronger areas within the firm and of the market as well. This allows organizations to review and monitor their objectives and targets in light of their activities and accomplishments.
