Managerial Accounting For Dummies

Chapter 18

The Balanced Scorecard: Reviewing Your Business’s Report Card

In This Chapter

Looking at the benefits of the balanced scorecard

Juggling the four perspectives of a business

Measuring a business’s qualitative performance

Using the balanced scorecard to implement strategy

As much as I like numbers and accounting, sometimes I have to admit that they don’t tell the whole story. Take profitability. I sure like to know a company’s net income — the difference between revenues and expenses. To me, this figure is accounting’s be-all and end-all, the ultimate and final buck-stops-here measure of performance.

And yet net income doesn’t say much about a company’s future prospects. A company may be profitable this year but unprofitable for the next five years. Furthermore, net income can come from good actions (like selling products with a nice markup) or bad actions (like selling off successful parts of a business).

For this reason, many companies evaluate their own performance by using a tool called the balanced scorecard. The balanced scorecard uses several different measures, ...