A Balanced Score Card is similar in concept to an employee performance evaluation for your business. It will list a set of performance measures you desire to track. The Balanced Score Card should be created by using your own company’s goals, which were established from the organization’s strategies.

The Balanced Score card can measure what is important to you, but generally covers the following topics (1):

1. Financial. In this section you will measure how the business is performing from an accounting perspective. Measurements can include, but are not limited to:

• Accounts Receivable Turnover ratio
• Gross Profit
• Net Profit (as a dollar value and/or percentage)

2. Customer. We all want our customers to be happy and return for more of our products or services. We can create measurements to verify our customers are pleased with our products/services. Measurements can include, but are not limited to:

• Customer satisfaction ratings
• Number of new customers
• Number of returning customers
• Number of complaints

3. Internal Business Process. In this section we determine how well we are providing value to the customer with our internal processes, i.e., how efficient we are servicing the customer/client. Measurements can include, but are not limited to:

• Delivery cycle time
• On-time deliveries
• Time to implement new products/services

4. Learning and Growth. Changing and improving are keys to success. We don’t necessarily measure how much training we attend, but how we incorporate new ideas and grow the business effectively. Measurements can include, but are not limited to:

• Employee turnover
• Employee satisfaction ratings
• Hours of training

You can create a Balanced Score Card in a MS Word file or MS Excel. You need 2-3 columns. The first column would be the item you are measuring, such as Gross Profit. The next column would be the desired change shown as a + or – depending on if you want the change to be positive or negative. The final column would be the change that occurred during the measurement period.

The Balanced Score Card uses information that is not necessarily found on the financial statements, so it incorporates all aspects of your organizational strategies. This tool forces us to look at non-financial measures to determine our performance. If you do not use a Balanced Score Card yet, consider developing one to see if it is a tool that might be helpful for your business.

(1) Garrison, Ray. H., Eric W. Noreen, and Peter C. Brewer. Managerial Accounting 13th Ed. New York: McGraw-Hill Irwin, 2010.