Business Performance Measures

Our current system of accounting and financial reporting is based on a model created by an Italian monk over 500 years ago, and the modernized version was created over 100 years ago during the industrial revolution. These financial reports are lagging indicators of how the business is doing, and put an emphasis on cost of goods sold, return on assets, and other historical cost measures. This type of reporting often leads business owners and mangers to focus on the wrong aspects of the business.

Business Performance Measures represent the evolution of the accounting process to create meaningful and predictive measures for today’s modern business structures that tend to rely on human capital rather than hard assets and inventory.

Business owners and managers that incorporate performance measures into their business create organizations that are aligned for achievement. They have a set of Key Performance Indicators that are a collection of financial and non-financial measure that measure results against stated goals. And, they have a set of Key Predictive Indicators that are a collection of financial and non-financial measures that provide information regarding where the business is headed.

Last week, the Santa Barbara Chapter of the Institute of Management Accountants invited C.S. “Bud” Kulesza to speak at their monthly meeting. Mr. Kulesza is recognized across the country as an expert on Business Performance Measures. He provided information on the successful criteria for performance measures, proper goal setting techniques and different types of performance measure reports including benchmarking and the Balanced Scorecard.

I was the only CPA in public accounting in attendance.

Hmmmmmm…

When your CPA has the opportunity to learn more about leading edge accounting models – where is he/she? At the event, or back at the office working on the past?