Benchmarking
In one sentenceComparing the performance of the business or one of its branches with a specific reference, such as another branch, a previous year, or a leading business in the industry, to uncover gaps and improvement opportunities.
Simply put
A figure alone is not enough to judge: is a 28% profit margin good or bad? The answer becomes clear when you compare it with a suitable reference from the same industry.
Internal comparison between branches or years is easier because the data is available and calculated the same way. Comparison with other businesses requires making sure the figures are calculated on similar bases.
Worked example
A pharmacy group noticed that the gross profit margin in one of its branches is 28%, while the average of its other branches is 32%, and the branch's annual sales are 2,000,000 SAR.
Margin gap32% − 28% = 4 points
Branch sales2,000,000 SAR
Gross profit missed = 2,000,000 × 4%80,000 SAR per year
Don't confuse it with
Horizontal analysisIt compares the business's own figures across years only, while benchmarking may also be against other branches or businesses.
in FullScreen ERP
Cost centers in the system show the profitability of each branch, project, or department, and unlimited fiscal years allow performance to be compared across years. General accounts