Help Clients Take Measure: CPAs Can Use Performance Measurement to Become More Complete Business Advisers

By Gregory, Edward; Myers, Roslyn | Journal of Accountancy, June 2002 | Go to article overview

Help Clients Take Measure: CPAs Can Use Performance Measurement to Become More Complete Business Advisers


Gregory, Edward, Myers, Roslyn, Journal of Accountancy


EXECUTIVE SUMMARY

* PERFORMANCE MEASUREMENT (PM) IDENTIFIES, monitors and improves those business activities that affect a company's profitability. The method uses both leading (future) and lagging (past) indicators to assess how well a business is meeting its targets in the present.

* THE SEVEN ESSENTIAL STEPS FOR A PM system are: Prepare a strategic plan, identify the CSFs, determine the CSF measures, establish measurement standards, collect data and monitor results, make necessary operating revisions and reward success.

* WHEN EMPLOYEES WORK WITH MANAGEMENT to pick critical success factors, all groups better understand how goals are met. Performance measures allow employees to see clearly what management cares about and the results it wants.

* CSF MEASURES SHOULD BE IN terms of volume, time and/or quality. They should be capable of being assessed weekly or even daily. Choose measurement standards that are realistic to keep the PM process healthy.

* A CPA WHO NOTES AND COMPARES weekly production figures with an industry benchmark during an audit or other engagement has spotted an opportunity to offer PM. Companies employ performance measures to manage risk as well as internal operations.

* CPA EXPERTISE INCLUDES PM SKILL SETS--the know-how to measure an entity's performance and design systems that reliably capture and report that information. As more companies find value in using PM systems, CPAs will be well positioned to assist in their design and implementation.

CPAs and financial managers face a greater burden than ever to evaluate business performance accurately and in real time. Instead of using end-of-period reports to see how a company is doing--an inherently slow process--CPAs can help clients and employers monitor ongoing productivity and financial strength by using performance measurement (PM) to track key activities, make decisions faster and attain goals-in a more controlled and targeted manner. It's a system many companies are turning to, and some CPAs see such engagements as a natural extension of the work they already do for their clients. Here's how it works.

IT'S NOT A CRYSTAL BALL, BUT ...

The goal of PM is to identify, monitor and improve business activities that have a direct impact on a company's profitability. The method uses both leading (future) and lagging (past) indicators to assess how well a business is meeting production and profit targets. Depending on the type of business, relevant "critical success factors" (CSFs; "key performance indicators" is an equivalent term) might include customer satisfaction, employee turnover, quality, time to market and/or other operational efficiencies. They indicate what's likely to happen to a company--both good and bad--in current and future periods.

The previous-period results CPAs traditionally look at (net income, earnings per share and revenue per employee, for example) are essential data, but they provide little insight about what's down the road. "If a company's net income increased from $10 million to $15 million last year, does that help me as an investor, or as a banker looking to approve a loan, feel comfortable that similar increases will occur next year?" asks Erik Skie, CPA, a principal at Larson Allen Weishair & Co. LLP. "Not necessarily." However, if investors or bankers learn the company not only increased its net income but also improved employee morale and decreased its employee turnover rate (or customer surveys revealed an increasingly satisfied clientele), they can better gauge its investment potential. In this case, well-trained and retained employees and satisfied customers suggest the organization is likely to continue its success.

SEVEN STEPS

"There are seven essential steps for implementing a performance measurement system," says William O'Brien, CPA, a California-based financial management consultant. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Help Clients Take Measure: CPAs Can Use Performance Measurement to Become More Complete Business Advisers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.