Performance Accounting & Measurement

How to use accounting for performance measurement.

1. Accounting reports should be used in performance measurement not only because it is already available but it is more precise, comparable, creditable, consistent, integrated and universal.
2. Profit center accounting is a good performance measurement that promote accountability as well.
3. Accounting ratios are good efficiency or performance indicators.  They are better than round figures which has less meaning than meaningful ratios.
4. Accounting ratios could broken into component ratios which should explain the cause effect relationship.
5. As usual, performance gaps are easily identified by comparing against benchmarked performance. (internal or external or both)
6. Initially, the critical performance gaps are drawn from the Du Pont ROE Chart.
7. Then, using input output ratios, we identify the appropriate key performance indicators.
8. Thereafter, a detailed gaps analysis should narrow to the most critical group or worker.
9. Therefore,  an understanding of accounting is essentia to conduct a reliable TNA.
10. Please note however that to confirm competency gaps, some task analysis of the jobs of the persons identified is needed.
11. Best practices are identified by performance benchmarking.
12. Draw the competencies from best practices.
13. Strategic mapping could also be drawn from accounting figures.
14. Input phase involves materials, labour and overhead costs identified as the expense accounts.
15. Outputs are the results of the functional departments such as marketing, Production, HR and Finance -  profit centre accounting is preferred.
16. To check process efficiency requires input output analysis.
17. When output is translated into sales ringgit or values, it is called the outcome phase.
18. Dynamic ratios could be applied to measure real change including opportunity costs or gains.
19. Individual performance is measurable if proper transfer pricing policy is in place.
20. One way to measure performance is return on pay.  (ROP) -  how much a worker generate in value for every dollar of his pay.

 computerised accounting