The paper "The Benefits of a Balanced Scorecard to an Organization" is an exceptional example of a research paper on finance and accounting.
In the past, the accounting department implemented traditional methods in analyzing data. However, the conventional means were not sufficient enough because they did not assist the organization in making predictions, thus need for a balanced scorecard. It is crucial for a business to evaluate its current position, and set goals for the future (Norreklit, Mitchell & Biornenak, 2012). This research paper explores the benefits of a balanced scorecard to an organization. In addition, the paper will describe the meaning of a balanced scorecard and its application in accounting. It will also seek to elaborate on the advantages of an organization implementing a balanced scorecard, and how to go about the implementation.
In the past, the traditional tools indicated an organization’s previous performance but did not have the means to predict its future accomplishments. The insufficiency of the traditional system brought about the balanced scorecard. A balanced scorecard is a tool used in accounting to enable an organization position itself in the business market. It is used to identify and find ways to improve the internal activities of an organization. A balanced scorecard offers the feedback necessary to an organization in order to help it in realizing accounting objectives (Seal & Ye, 2014). Therefore, a balanced scorecard is curial to an organization because it enables it to evaluate its internal practices and come up with means on how to improve the processes in the future.
Importance of a Balanced Scorecard
The balanced scorecard measures the financial activities, learning standards, the customer and business processes. It helps the firm know how the four crucial activities interact to bring about business success. The business scorecard evaluates the customers’ needs and wants, and how to satisfy them profitably. To be able to meet business needs and wants, the organization requires finances for the activities, and for business processes to run smoothly. The business processes for example production, marketing, accounting need to work together to achieve the organization’s objectives. The organization is required to conduct learning measures to the employees through training in seminars. The learning process will impact the employees with skills and new knowledge on the marketing trends and enable the organization’s business processes to run smoothly. When the four activities that are cross-checked in the balanced scorecard run efficiently, the organization can improve and implement its strategies, objectives, and vision (Norreklit, Mitchell & Biornenak, 2012).
How a Balanced Scorecard Works
The organization should set short-term accounting objectives, for example, return on investment and reducing operating costs in order to institute an effective balanced scorecard. With the already established short-term accounting purpose, the organization, then searches for alternatives to achieve the short term goal through satisfying customers to gain returns on investment. However, most leaders fail because they implement the new short term goals using the old measures that are incompatible with the new objectives. In a balanced scorecard, the managers have to create new measures for the newly set objectives and evaluate them using the old criteria of effectiveness (Cooper, Ezzamel and Qu 2012). New measures are essential because the old measures could prove to be outdated in achieving financial goals. For the organization to increase sales, it needs to find better marketing strategies like vigorous advertisement and promotion. The tactics will improve the sales, and in turn, improve on returns on investment.
Communication of the Balanced Scorecard
The balanced scorecard also needs to be communicated effectively throughout the organization for it to achieve the desired outcome. An organization has to describe the accounting objectives that need to be performed, for instance, to increase the profit by five percent or to reduce the operations costs by ten percent (Norreklit, Mitchell & Biornenak, 2012). When the objective is communicated well, the employees are aware of what is expected of them to achieve this goal.
In conclusion, the balanced scorecard has more benefits to an organization than shortcomings. Thus, it is important in accounting because it enables an organization to create projections for the future based on past data. Accounting is always coming up with ways to increase the returns of the group and minimize the costs (Seal & Ye, 2014). Therefore, a balanced scorecard is critical in enabling the accounting department to integrate with the functions in achieving the set objectives and, in the long run, attain the vision of the organization. When an organization adopts a scorecard to improve on its internal practices, it leads to innovation when trying to establish new ways for improvement.
Cooper, D. J., Ezzamel, M., & Qu, S. (2012). Popularizing a management accounting idea: The case of the balanced scorecard. University of Alberta School of Business Research Paper, (2013-03).
Nørreklit, H., Nørreklit, L., Mitchell, F., & Bjørnenak, T. (2012). The rise of the balanced scorecard! Relevance regained?. Journal of Accounting & Organizational Change, 8(4), 490-510.s
Seal, W., & Ye, L. (2014). The balanced scorecard and the construction of a management control discourse. Journal of Accounting & Organizational Change, 10(4), 466-485.