Balanced Scorecard for Financial Management

This article discusses the concept of balanced scorecard in financial management. It explains the four perspectives of balanced scorecard - financial, customer, internal business processes, and learning and growth. It also discusses the advantages and disadvantages of using a balanced scorecard and provides a case study on its application. The article concludes with a sample balanced scorecard for a company.

Running head: Financial Management
Financial Management
Name of the Student
Name of the University
Author Note

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Table of Contents
Question No 1............................................................................................................................2
Question No 2............................................................................................................................8
References................................................................................................................................11

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Question No 1
Strategic management help the company to implement the goals and objective, which
made by the top management regarding the business. It takes all the resources taking
consideration of internal and external (Rothaermel 2015). It provide an outlines of an
enterprise, which contains organization objective, developing policies and planning regarding
how to achieve the desired policies. Strategic management helps the company to achieve
long-term goals and objective. Each organization has to have strategic management in their
vision and mission of the company. Implementing of Strategic management in the company
is a tough job as it includes very process, company have to see many factors before
implementing it in to the management of the company. Each company have to check whether
they are able to achieve its desired goals and objective and to do this it use Balanced
Scorecard. This help the company to put its strategic management into its vision and mission
of the company.
Balanced Scorecard is a strategic tool, which help the company to put its mission and
vision in to operational actions as strategic planning. This help the company to works as per
its mission and vision and able to achieve its desired objective (Akkermans and Van Oorschot
2018). It show the indicators, which is to use while implementing its strategic planning,
process. It is been made in four perspectives and by implementing all the four perspective
company can able to get the required objective. The four Perspectives of the balanced
scorecard are:
Financial Perspective
It is a quantitative approach, which take base from the previous years. This approach
made in the viewpoint of the shareholders and the other financial users. It suggest the
company how it can attract more to the shareholders and other users (Ansoff et al,. 2019). It

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also provide details analysis of the operational management and the sustainability of the
chosen strategy. It help the company to know various aspects of finance and it add all the
finding which is been found in all the other perspectives. It help the company to make targets
related to financial objective of the company such as increase in sales of the company,
Customer Perspective
The second and most important perspective of balanced scorecard is Customer
perspective. It is widely used that each company serves a need of the customer in the market.
Customers are the one from which the company get the revenue so they should know what
are the needs and preferences of the customers (Busco and Quattrone 2015). Each
organization structure try to meet the needs of the customers but as there is so much of
competitions in the market, so this perspective help the company to know how attractive they
should appears in front of its customers. It help the company to build a brand image in front
of the customers.
Internal Business Processes
The third important perspective of balanced scorecard is Internal Business Processes.
This perspective help the company to analysis its internal process and to know what are the
new activity that the company had implement in the business (Cooper, Ezzamel and Qu
2017). It help the company to know what are the new add up they have done in the process of
the business so that they able to meets all the criteria of customers, shareholders and financial
users. It help the company to know how to satisfy the each class of customers and the
financial user of the company
Learning and growth
The fourth and the last perspective of balanced scorecard is Learning and growth. It
see the ability of the company that whether the current system can improved or growth is

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there in current environment or not (Hansen and Schaltegger 2016). It help the company to
know the place where it can improve itself and because of it, expansion in the company can
take place. It see whether the selected strategy can be achieve by the current system.
Interpretation of Balance Scorecard model
It help the company to make a balance between its short and long term obligations as
it help the company to manage finance (Hill, Jones and Schilling 2014). It also help in
keeping the balance between its financial and non-financial criteria, as it should manage them
properly. It also help the company to maintain the balance between its leading and lagging
indicators and external and internal perspective.
Implementation of Balance Scorecard
Implementing of the balance scorecards have different roles, which the management
had to do so that it can implement it in the business activities of the company. The steps
involve in implementing the scorecard is been discussed below:
STEP: 1 – Firstly the management should set their mission, vision and objective of
the company (Hill 2017). AS after making of the objectives than only it can make a strategic
plan regarding of implementing it.
STEP: 2 - After completing the step 1 of setting up the objective, the company should
analysis the expectations of the customers and stakeholders with the company (Hladchenko
2015). It should do stakeholders analysis, as it will get to know what are the thing, which
needed by the stakeholders.
STEP: 3 – After completing the stakeholder analysis, it should make a list of what are
the critical success factors of the company (Hoque 2014). It should know what are the factor
in which the company have strength and can make the reason of success of the company.

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STEP: 4 – It should convert the strategic objective of the business to the personal
goals of each individual as if each individual thinks the objective of their own than it will be
easy for the company to achieve the desired objective easily and effectively (Martello,
Watson and Fischer 2016).
STEP: 5 - Company should set an indicator of its performance so that it can know
how good the strategy is performing in the company and what are the after effects of the plan
which is been implement here (Niven 2014).
STEP: 6 – It’s the last step of the balanced scorecard and its help the company to
know value of the objective of the company and help them to translate the financial objective
into its operational activities (Noe et al., 2017).
Therefore, it can see after completing all the steps a company can easily implement the
balance scorecard in the company and can able to meets its goal and objective. The company
should follow this step as it help the company to make their strategy implementations easy
and effective.
Advantages of Balanced Scorecard
1. Improved Strategy Planning – The balanced scorecard provides an outline
about the framework of the company strategy (Perkins, Grey and Remmers
2014). It is always there in the business organization so the managers and the
individual will not be able to omit this will making and financial decision of
the company.
2. Better Strategy Communication - As the above strategic planning written in
a single sheet of paper and includes all the necessary points so the
management can easily communicate it with both internal as well as external
factors.

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3. Proper Management Information – The balanced scorecard make the
company to make and analysis its performance indicator and thus it help them
to manage and analysis their data with actual data as a result it get a better
view of the management.
4. Improved Performance Reporting - As the company use many performance
indicators so as result of it, the company reporting also became easy and its
give a better presentations in front of customers in compare to other who does
not have this in their reporting system (Rampersad and Hussain 2014).
Dis-advantage of Balanced Scorecard
1. Costly Investment – The implementation of balance scorecard required a very
huge investment, which is not possible for small business (Shafiee, Lotfi and
Saleh 2014). As this a long-term phenomena so each employee have to
understand it and it takes times so which can affect the smoothness of the
business.
2. Acceptance by Stakeholders – The system should be taken by each
individual in the company. Each company employee should know how the
system work and how it can give benefit to them as after that only it will be
accept by them , but if the employee does not see any benefit than they will
not work as per the system and thus the system will fail.
3. Strategic Decision – As the system contain detailed of strategic decision so it
should presented well in front of stakeholders, and the company should tell
them how it would help the company (Shen, Chen and Wang 2016). As if the
stakeholder does not find the plan successful than the system will not able to
maintain the requirement for which the system was made by the company

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4. Difficult in Data Collection – It require many data from the company, all the
data should be accurate and related to the company so the managers may
found it difficult to gather all the required data and then to analysis the same.
So if the data are not properly recorded and analysis than the company will not
able to make a proper system for the organization (Tjader et al,. 2014).
Balanced Scorecard application in the given case study
In the given case study of the company named as Great Persons, Inc. (GPI). The
application of balance Scorecard can done as by following the given steps, which are there,
listed below:
Step 1 – The company should sets it goals and objective of the business. The top
managements should analysis their needs from the business and then it should set its goal and
objective for the company.
Step 2 – In step 2 company should analysis the needs of its customer and stakeholders. It
should check its desired objective about its customers and stakeholders, as the company
should be able to satisfy the needs of its stakeholder.
Step 3 – After completing the above-mentioned step, the company should set an analysis of
what are its success factor, which can help them in implementing the system more accurately
as it should know the strength side from which it can know whether to give more focus of the
company.
Step 4 – In this step the company should change their strategy goals in to every employee
personal goals. As if each employee of the company is working taking company objective as
their own objective than it will be easy for the company to achieve the desired goal.

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Step 5 – This is the final step and the most important step of balance scorecard as in this step
company have to set in Key Performance Indicator that will help the company to know how
they are performing in the business.
Key Performance Indicator it is a tool, which help the company to measure value of
the company, is able to achieve its desired objectives. Organization use KPI at different levels
so that to evaluate the success of reaching the targets. This tool help the company to evaluate
the success of the organization and to judge their performance over different interval of time.
Therefore, in the above all the steps are there from which Balanced Scorecard can be
applicable in the company. Also the detail explanation of KPI is been given and with the help
of KPI the company can able to judge its performance also able to know the how the strategy
which is made by them is working and what are the effect of strategy in the performance of
the company.
Question No 2
Balance Scorecard of the company
Particular Strategic
Priorities
Objective Measures Targets Initiatives
Financial Financially
Strong
F1 –
Increase in
state funding
F2 –
Increased in
Increase in
revenue of
the company
Increase in
the donation
F1 – 5% of
increase of
cash flow
F2 – 3% of
increase in
By providing
new activity of
the company.
By initiating
new customers

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donations of the
company
total
donation
to the
organization
Customers Delight the
Customers
C1 – Fulfil
the needs of
the
customers
C2– Increase
in training of
methods of
disabled
adults
Increase in
profits of the
company
Increase in
no of the
customers in
training
program
C1 – 3% of
increase in
profits
C2 – 5%
increase in
number of
customers
By managing
the fund
properly in the
organization
By providing
new different
service to the
customers
Internal Increase
Customer
vale
I1–
Increased in
quality of
services
Increase of
customers
by quality
services
I1 – 2%
increase of
customers
By adding new
ways of
checking their
quality and
maintaining
their quality
Learning
& Growth
Motivated
and
Prepared
Workforce
L1 -Adding
new skills
for the
employee of
the company
Increase in
efficiency of
the company
L1 – 3%
increase in
the
efficiency of
the
company
Adding new
training method
of the company.

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From the above table it can be see the balance scorecard of the company and the analysis
done below:
Financial Perspective of the company is to increase its state funding and donation and the
target, which the company has set about it, is 5% increase in the state fund and 3% in the
donation. To achieve the above they are initiating new activities in the company and going
for new sections of customers so they can get more donation for the company
(Valmohammadi and Ahmadi 2015).
Customer Perspective of the company is to increase its profit, and increase its numbers of
customers and to achieve that the company is managing their fund properly and try to
minimize the costs of the company (Wheelen et al., 2017). So that they able to increase the
profit of the company and to increase number of customers, the company is adding much
activity with the old ones so that it can attract much number of potential customers.
Internal Perspective of the company is to increase the quality of the company, as the company
is having policy of providing quality services to the customers. To provide more quality
services the company is adding new methods in their quality process, which will help to
provide more quality product to the company.
Learning and Growth Perspective of the company is to train and evaluate the skills of the
employee of the company. This is to be done so that the company can increase its efficiency
of the services and as a result of it the company can decrease their total cost as the increase in
the efficiency of the employees will result in low cost so company can save money. To do so
company had added many new training activity for its existing employee, which will help
them in getting the required objective of the company.

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