CEOs, CFOs and finance teams can gain more speed, agility and foresight by implementing financial and banking performance management in their businesses.
Performance management is all about working out what you need to measure and how often you need to monitor it.
For financial institutions, understanding the difference between financial performance management and banking performance management is necessary for effective performance management. By comparing their reports and goals, we can outline their differences.
What is Financial Performance Management?
Financial performance management helps you assemble a clear picture of your current financial position, spot opportunities, and track ongoing trends in financial ratios.
It allows you to drive efficiency, deliver stronger business foresight and steer business performance based on self-service reporting.
What is Banking Performance Management?
Banking performance management requires analysis of the outstanding loan portfolio, past-due loans, new loans and deposits.
The Daily Financial Position
A key part of financial performance reporting is providing a clear idea of financial position. Without a cloud-based solution, this would be impossible, as the data would be out-of-date very quickly.
The results need to be current and relevant in order to be an accurate picture of the current financial position. Two key reports to update daily are the balance sheet and income statement.
The balance sheet grants the CEO the freedom to analyse the daily movements of loans and deposits. The income statement allows the CFO to check the interest accruals each day.
In financial performance management, a comparison between previous and current reports can help put the results in context.
Current month, previous month and previous quarter reports can all be compared. The main reports that benefit from comparison reporting are balance sheets, income statements and margin analysis.
Daily Banking Performance
Banking performance is measured by branch performance in an executive summary, as opposed to company income/balance.
There are two assets that are ideal for providing an executive summary of your banking performance: a performance dashboard and a branch analysis report. The dashboard gives an accessible overview of the month's lending activity and related outstanding credit.
The branch analysis report shows a summary of branch and region performance regarding the number and size of outstanding loans.
Banking performance reporting still features comparisons but specifically between the bank branches' accomplishments, rather than financial history. The branch scorecard and loan officer scorecard allow you to rank and analyse branch and loan officer performance.
This is important because very few systems can provide daily scorecards for new lending. This information can directly impact the daily performance of frontline staff, such as loan officers.
Trend reporting is common across financial performance, since measuring changes over time can identify growth or undiscovered problems.
Trends can be determined from most reports, but reporting on averages (or budget vs actual comparison) over a long period of time can uncover trends that are easily missed when only looking at the past quarter or six months.
While financial reports analyse business position and profits, the banking reports focus on the behaviours of the clients and the loan portfolio.
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