That means keeping up-to-date accounting records so that you can plan what should happen, or what you want to happen, in the future (and that applies even if your business isn't clairvoyancy).
KashFlow has just released a Health Check report that lets its customers see how their business is doing in itself, with indicators such as money received from customers. I'm not going to repeat the discussions I've had with Dennis Howlett about the validity of this report. I think it's a good idea and that the report does have room for improvement.
This report isn't meant to be benchmarking and it says that quite clearly. But FreshBooks believe that:
Industry benchmarks matter because if you don’t have anything to compare yourself to, you are just shadowboxing. Everyone looks good when they are shadow boxing, but when you step in the ring with your peers, it’s another story! You can learn from seeing how you compare to others in your field.I'm not sure that "everyone looks good when they're shadow boxing". If a business is not making any sales then its KashFlow Health Check report would look pretty awful :-)
But I have to say that I do very much like FreshBooks' benchmarking reports.
FreshBooks invites their users to say which profession they belong to, and if they choose to do this, their statistics are included in the benchmarking reports and they get a quarterly "report card" showing their business benchmarked against others in the same profession.
And the report is written in plain English, too, with useful statistics like "amount invoiced this quarter", "average time to collect payment", "average amount invoiced per client billed" and percentages of revenue from recurring and non-recurring sources of income.
But what really made me sit up and say "that's good that" was the fact that FreshBooks also supply a benchmarking report to people who don't even use their software, including all the statistics I mentioned above.
FreshBooks users get even more useful information, like percentage of invoices paid online, which, when coupled with the statistic of how quickly your customers pay, gives a real handle on whether your credit control is tight enough.
So - whether industry benchmarking is important or not is a matter for debate, but if you do want to benchmark, then FreshBooks is a good place to do it.