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Financial perspective - what is the financial perspective?

To be successful in a financial point of view, how we see our shareholders?, The financial perspective shown in the balanced scorecard allows us to define and analyze in our financial objectives, as well as breaking down the possible strategies and action plans necessary to achieve our financial targets.

The parents of the Balanced Scorecard, Kaplan and Norton, define 2 types of strategies aimed at boosting our financial results:

  • Growth Strategy

  • Productivity Strategy

Growth Strategy – Financial perspective

The growth financial strategy is based on increasing the income of the organization by increasing revenues via new sources (building franchise) or increases the value of customers.

The strategy of building franchise consists in obtaining new sources of revenue by selling the product in new markets, development and creation of new products or gaining new customers.

The strategy to increase customer value in new revenue is based on keeping deep relations with our customers, know our clients allows us to know your needs with the effect of offering highly specialized products and solutions for them, with the possibility of making sales cross, using the CRM tool allows us to define, monitor, manage and get this strategy based on customer relations.

Productivity Strategy - Financial perspective

The productivity financial strategy is based on increase company profits by reducing costs throughout the organization and improve asset utilization.

The cost reduction strategy improve the cost of the entire organization, both direct costs of our products and services and indirect costs, is currently using the Japanese Lean manufacturing tool as a basis for cost reduction organizational structure, initially this philosophy is implemented in production plants seeking continuous improvem in organizations in which their effective implementation has been made possible move to other organizational departments, the results of the implementation of the tool Japanese Lean manufacturing will depend on several factors such as the social conditions of the company, culture and location of the company, etc ...

The strategy to improve asset utilization consist in reduce working capital and fixed capital needed to support for the activity of the organization.

Alignment of financial strategies

Once defined and explained the different financial strategies presented by the scorecard, we think a priori that may seem strange to the implementation of both strategies at once time, the growth strategy involves making new investments in search of new markets, development of new products or services, being contradictory to the policy of cost reduction, good design of a strategic map allows us to balance both strategies the best results, ie during the mapping strategic actions will be developed to reduce cost of the organization as applicable to the investments required for the growth strategy, obtaining finally a small investment with results of getting more customers and revenue excellent.

It is vital and very important to define clearly each of the strategies, as well as align in the same mission and vision without causing any interference. The failure of poor and improvised implementation of strategies without having the entire organization can be aligned to the company to produce greater losses than before implantation, for example the cost increase caused by an unnecessary overquality product price increases, this overquality not valued by customers who are unwilling to pay, resulting in an abandonment of purchase of products and lower the income of the company.

Often the binomial quality - cost are incompatible, increased quality of product required to be performed extraordinary investments in facilities, tools, training, etc ... the definition of quality requirements must be defined jointly with the departments that are involved from the finance department to collect all the possible costs of this improvement to the sales department which has to be aware and validate whether the quality improvement achieved can get to sell more product with a higher price.

The alignment of the entire organizational system is key to the successful implementation of financial strategies.

Indicators of the financial perspective

The design or selection of indicators is one of the most important steps in developing the scorecard of the organization, designed or selected indicator must be able to measure correctly the associated strategy and add value to decision making regarding the actions needed to improve this indicator.

Below is a list of indicators that can be used in the financial perspective, as quoted in the preceding paragraph, the indicator chosen depends on several factors such as the proposed strategy, the typology of the organization, etc ...

  • Share price

  • Return on shareholders' funds

  • Economic Value Added

  • Cash Flow

  • Ratio of net profit

  • Growth in sales revenue

  • Percentage of income over new customers.

  • Percentage of cost reduction

  • Increased return on assets

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Excel scorecard - Balanced scorecard in Excel

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