Performance management is a dynamic field that has become crucial to the success of any organisation, regardless of scale and industry. It is one of the important components of IFRS (International Financial Reporting Standards). It has also become highly competitive, compelling management accountants to acquire the right certifications, stay abreast with each of its recurring processes, and hone their craft relentlessly. 

Performance Management is the application of knowledge, skills, tools and techniques to manage the overall performance of a business. 

Performance management is an important aspect of many accountants’ careers. This is because each organisation has a set of overall preferred business performance that it wants to accomplish. These expectations are usually implied to its management accountants or explicitly conveyed to them at times. 

Either way, it is important that the management accountant endeavours to undertake this responsibility because it spurs development and business productivity. More specifically, it helps organisations align their employees, resources and systems to meet their business objectives strategically. It must also meet IFRS guidelines. 

Yet a common mistake happens so often – managers make do with the minimum basics and amateurishly manage the performance, specialist costs, budgeting and decision-making that organisations need. 

At best, these accountants are not performing as efficiently or effectively as they could. In the case of worst scenarios, changes in management techniques, performance evaluation and quantitative/ qualitative information for planning can leave them incapable of responding. 

Fortunately, ACCA’s Performance Management (PM) course serves as a solution to enable performance managers to stay on top of the game and stay compliant with IFRS. 

In the business world, the details of performance management prove challenging to evaluate without the right application of knowledge and an effective performance-management system. This is a major concern for all organisational management and taking the Performance Management course will help you avoid the common pitfalls faced during evaluation of overall business performance and adherence to IFRS.

Common Pitfalls To Avoid And Stay Compliant With IFRS

Cost Accounting – It is one of the cornerstones in performance management. Many decisions are based on these numbers and its end goal is to provide the management with quantitative data so they can make decisions on how to optimise business practices and processes based on cost efficiency and capability. 

However, in many organisations, cost accounting usually does a really poor job of capturing the detailed cost information aka qualitative data that the management needs to control current operations and plan for the future.  

Decision-Making – Ideally, decision-making helps management accountants decide how to control the risks and uncertainty inherent in businesses. It is the one thing that is high on the agenda of many managers and leaders alike. 

However, due to a lack of knowledge and skills, many organisations are still struggling to incorporate circular thinking in their strategies and day-to-day decision making.    

Budgeting – The biggest financial misstep an organisation can make is to apply inappropriate budgeting techniques and methods for planning and optimising business performance. 

Financial problems arise when that happens, since budgeting helps in directing both capital and revenue resources in a profitable way. In addition, not taking corrective or remedial action when things go wrong is another reason why budgeting fails sometimes. 

Performance Measurement and Control – This is widely perceived to be essential in helping organisations assess and improve performance issues from both a financial and non-financial viewpoint. Thus, management accountants at the top of the hierarchy in huge organisations need a system that is effective and efficient. 

However, relatively little attention has been paid either to the process of collecting, analysing and/ or reporting on information when it comes to the performance of an organisation or on the appropriateness of measures and methods of performance etc.

Critical Success Factors To Performance Management While Meeting IFRS

It is very important that organisations build an effective and efficient performance-management system that will help any organisation to navigate management hurdles, align their employees and resources to strategically meet their business objectives as well as stay compliant with the IFRS guidelines. 

These systems help to ensure that the critical success factors of an organisation are targeted and high performance is consistently achieved in these areas by tracking performance through Key Performance Indicators. 

In conclusion, only management accountants with field experience and tactical proficiencies will remain relevant in the market. Organisations with such accountants, combined with an effective and efficient performance-management system, will be able to maintain their competitive edge in the industry and enjoy continued business growth.  And ACCA’s Performance Management course will help you be in the driver’s seat of performance management monitoring process while adhering to IFRS.