The issue of capital allocation and internal funding is one that every business must face. It’s through this system that decisions about where resources are allocated will be made – i.e. where the cash flows within the business and who is going to be responsible for spending it. A robust process of capital allocation can help businesses to be more resilient and work to stimulate growth and drive an enterprise towards its goals. Business performance management may have a key role to play in supporting better internal funding allocation and more effective strategic decision making as a result.
Nurturing ongoing improvement within the business
Any business tends to be a fluid experience these days. External and market factors, as well as seasonal changes and product successes and failures can all have an impact on prospects and profits. What’s key is that management is going through a continuous process of improvement that is designed to refine the ways in which the business will reach its goals and readjust when corrections need to be made. Where does this have an impact in capital allocation and internal funding terms? Well, business performance management could help make the process of capital allocation more efficient and simpler to do.
What is business performance management?
The use of data lies at the heart of business performance management. When it is collected and analysed in the right way this data can provide key insights into business systems and objectives. It is a process of setting goals and then tracking the ways in which those goals are being achieved by the business. Data is analysed in order to establish how the methods the business is using could be optimised so as to achieve objectives more efficiently. Most organisations use business performance management either to reduce operating costs or generate more profit – or both. When it comes to capital allocation and internal funding, the use of business performance management data can create a key advantage in terms of ensuring that resources are being channelled to the right place.
Linking up internal funding allocation and business improvement
Data that is generated via business performance management can be a key part of proposals for business improvement that influence how internal funds are allocated. In particular, this can be used to describe the scope of a problem that currently needs to be solved or to input into facts and analysis, such as the root cause of an existing issue, any relevant trends and facts about the business that may be important to note. These insights can create a robust basis for directing the way that capital is allocated within the business so that it is more effectively used.
There are many different factors involved in capital allocation and internal funding. When resources are not applied well a business can suffer but when the right strategic decisions are made the results can be truly transformative. The use of business performance management data has a crucial role to play in ensuring that decisions about internal funding are being made with the right perspective.