Understand the benefits of using financial benchmarking during an economic downturn
Economic downturns are times when the management of an organization is severely tested over the financial health of the company. Even large scale enterprises are susceptible to bad investor sentiment and tepid market during a downturn and their financial health too can plummet. Also an economic downturn can prove to be a handy excuse for some employees to justify the poor financial performance of a division or even the whole company. In such a situation, financial benchmarking can come to the rescue of the management by giving a broad pointer on to how the overall industry is performing in the given scenario.
While financial benchmarking in itself can to an extent offer a plausible understanding of the financial standing of your company in its own vertical, it is limited by lack of perceptive insights on specific trends. However when benchmarking is combined with KPIs, it offers a chance to lay stress upon specific aspects that if worked upon can a go a long way in improving the financial standing of the organization. Using a financial benchmarking scorecard further allows the management to isolate problem areas by checking them up with industry peers in a holistic manner and rationalise the corrective measure that need to be initiated.