Benchmarking 101: Definition, Types, Benefits, and How to Use Them to Set Better Goals and Optimize Performance

With our product, you can quickly see how you stack up against your industry competitors or companies that are similar in size. Browse Databox’s open Benchmark Groups and join ones relevant to your business to get free and instant performance benchmarks. Or, if you want to stay on top of your PPC marketing campaign, you should focus on Google Ads benchmarks and Facebook Ads benchmarks. For instance, if you want to benchmark website performance, you can look for Google Analytics benchmarks in the benchmark reports. There are several ways to conduct data collection, with some of the most popular ones being surveys, interviews, and competitor research, but this will largely depend on what you’re benchmarking. Next up, you’ll have to collect the data and information on the process you want to benchmark.

  • Your bookkeeper reconciles your accounts, categorizes your transactions, and produces your financial statements.
  • Fiduciary Decisions explains its process for comparing personalized managed accounts to options such as target date funds.
  • Business benchmarks help you stay on top of the latest market or industry trends by comparing metrics such as revenue, growth rate, ROI, market share, etc.
  • Prior to his work with IFAC, Mr. Thompson worked for Touche Ross & Co., London before going on to lecture on corporate reporting and analysis at universities in the UK, Singapore, and Malaysia.

Without a system of goal-setting and monitoring results against a target or benchmark, accounting firms may struggle to achieve sustained improvement and higher returns. Data can be presented in customized dashboards that show, at a glance, whether or not the firm and its partners are performing above or below their peer groups, and can help leadership decide where to focus their efforts. The answer lies in the nature of the client’s diverse business operation, which requires resources to be retained in country, with most of these retained positions being higher cost than the transactional roles being centralized.

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You need to share the results and insights with your stakeholders, such as your management, staff, clients, or investors. You also need to use the findings to improve your accounting performance and practices, by setting goals, action plans, timelines, and measures. You can also monitor and evaluate the impact of your improvement initiatives, and adjust them as needed. Comparing your overall accountant for independent contractor organization’s performance against other companies in the industry is called performance benchmarking (also known as competitive benchmarking). The goal is to identify areas for improvement and pinpoint any performance gaps that currently exist. This type of benchmarking is typically the most complex because you need to have granular insight into the performance metrics of your competitors.

  • In other words, we look for insights (through) benchmarks that can help us assess our own company’s performance, identify room for growth, set smarter goals, and pinpoint useful industry practices, among other things.
  • You will certainly gain more scalability, but the short-term financial benefits may not be there.
  • Benchmarks are used in accounting and financial analysis to make comparisons between different companies and industry norms.

You need to look for patterns, trends, gaps, strengths, weaknesses, opportunities, and threats in your accounting performance and practices. You also need to understand the reasons behind the differences and similarities between you and your benchmarking partners. You can use various tools and techniques to analyze and interpret the data, such as ratios, charts, graphs, tables, or dashboards. Next, you need to decide who you want to benchmark against and how you want to collect and analyze the data. You can choose from different types of benchmarking partners, such as competitors, industry leaders, best-in-class performers, or internal units.

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To provide the client with further opportunities for cost savings, we analyzed the opportunity to utilize outsourcing for the transactional roles being centralized. Utilization is the hours an employee bills divided by their total number of available workable hours. For example, an employee who bills 1,600 hours out of 2,000 hours is 80% utilized.

As Head of International, he successfully improved the underlying performance of the company’s European operations and expanded its global footprint in key markets, including establishing a leadership position in Japan. Comparing your company’s financial performance against industry standards or competitors is called financial benchmarking. This type involves a thorough financial data analysis (revenue, expenses, profitability, etc.), and the goal is to make sure financial decisions are data-driven. Financial benchmarks play a huge role in assessing your business’s financial health. Finally, you need to communicate and implement the findings of your benchmarking.

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Further analysis of the client’s operations in all markets determined that we could potentially reduce 12 FTE’s across all markets through centralization and optimization (18%), and the resulting organization would consist of 53 FTE’s. Comparing the pre and post-optimized organizations to benchmark data, the company would now be operating at about 30% better than the Median performer, and approaching Top performer level. Reviewing the AP related benchmark data, the company was performing at approximately 25% below the Median performer. For the specific AR benchmark that we considered, the company was performing at 85% below the Bottom performer. This clearly indicates that there are opportunities for automation and performance improvement to drive efficiencies resulting in lower headcount.

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The management team of a business may choose to engage in benchmarking when it has no basis of comparison for determining where there are potential improvements within the entity. With real-time insights, you can make on-the-fly decisions about where to spend and where to save, helping your business stay on budget. After setting the regulatory table, Fiduciary Decisions would consider the monthly income for a retireee in a base case retirement plan with no advice, as compared to one in a managed account. In the managed account scenario, it would take into account decisions that might be made from the advice, such as deferring above the auto-enrolled amount. Managed account offerings in qualified retirement plans are designed to provide personalized investment advice and decisionmaking guidance to participants. But as every participant’s situation is different, independently benchmarking the offering against lower-cost offerings such as target-date funds can be difficult.

We conducted a benchmark assessment of their various market operations to identify areas of opportunity for cost and productivity improvement, in order to consider establishing a centralized Shared Services operation. For example, in Accounts Payable, the number of invoices processed per FTE is a traditional “Efficiency” metric. Similarly, for General Accounting, the number of Balance Sheet Accounts being managed by an FTE, helps to measure the efficiency of the General Accounting organization. And for Accounts Receivable, the number of receipts processed by an FTE is a good “Efficiency” measure for this function.

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To achieve the KPIs discussed, digitalization in accounting can have a significant impact. An 84-page report by research firm Autonomous forecasts that by 2030, AI could save more than $1 trillion in costs—with at least $240 billion coming from finance data processing, compliance, and collections system digitalization. As the accounting industry trends towards AI technology and robotic process automation (RPA), benchmarking in this area will become a top priority.

Whether you are a customer looking for help with your policy or a business wanting to learn more about our solutions, we are here to help. Last week, the market capitalisation of Gazprom, the world’s biggest natural gas company by output and reserves, dipped below that of Gazprom Neft amid high oil prices and after a dividend announcement by the subsidiary. You can pull up the benchmark you extracted into a Databox dashboard and have it ready immediately for your shareholders to review.

Present the data to key decision-makers in the company and work with them on coming up with strategies. Then, also analyze your competitor’s data and find out whether there are any performance gaps. If there are, you can then try to pinpoint the strategies that they use to create those gaps. They’re great places for extracting data that you will benchmark, but that’s pretty much it. Google Analytics can also be a great source of SEO benchmarks (alongside tools like Ahrefs and SEMRush).

There are many other examples of Efficiency metrics that can be applied to your organization. Years ago, I met with a company to discuss its marketing practices and learned it had worked with a group to benchmark its spending on marketing to its competitors. When I asked what they were getting for their spending, they were not able to answer. With nearly 30 years of experience working with big names on Wall Street to healthcare and insurance, Paul has unique insights into the areas of cloud, security, platform, and compliance systems.

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